We are set up for a very interesting expiry this month, made all the more interesting by the big push lower in the last half an hour of the day.
Have a look :
What looked like a day where selling had been controlled at the 5465 HVN level, which stood out for the major part of the day, turned around for a close exactly there.
This is the first time in four days we saw selling into the close. The chart shows the big pullbacks developing in the second half of the day.
The Selling was even felt in the Bank Nifty which had it’s first close below value area low and below the 10980 level we have been watching in several weeks.
Since tomorrow is expiry I want to quickly turn my attention to the action tomorrow, because tomorrow is the one day in the trading calendar when action gets dictated by open Interest and little of every thing else.
Let’s look :
The IV range calculated by our Vix Calculator is 5518-5420 in the future and 5516-5409 in the spot.
By all accounts it will be volatile, as the PE writers sitting smug at 5500 PE will be facing the heat.I think many of them didn’t anticipate this closing today and if they wilt tomorrow then 5420 will happen.The 65 lacs in OI at a current price of 37.45 will ensure that easily.
However if you look at the chart closely, then you will notice that despite two days of selling where we have seen the Nifty come down from 5540 levels to today’s 5465, we have not seen a great reduction in the 5500 PE for September. In itself it tells us that the PE writers are confident that this downtrend will not continue.
However tomorrow it is not about September but about August.
I mentioned last month that the VIX formula by itself is nothing but a range.The key to the expiry is always in the Open Interest.
For tomorrow the key will be the 5500 PE.
If unwinding is seen then a short below our HVN at 5465 will be a safe bet.