Pre Market Report 03-Sep-2024

Summary

US markets are closed, Asian markets are mixed, with the Nifty index slightly higher. Retail investors are puzzled by the missing $5 billion inflow, while HDFC Bank's performance disappoints. Nifty options show a rise in put premiums and a drop in call premiums, with aggressive selling of calls. The script discusses unusual premium movements, open interest, and resistance levels around 25500, suggesting a bullish view. Institutions continue buying despite market highs, indicating a strong trend. The speaker anticipates potential market movements and shares their current options strategy.

Takeaways

• 📈 US markets are closed, and Asian markets are mixed, with the Nifty index slightly higher.
• 🤔 Retail investors are confused about the missing $5 billion inflow.
• 📉 HDFC Bank's performance is disappointing, affecting the overall market sentiment.
• 🔍 Put premiums are increasing, while call premiums are decreasing, indicating a bearish trend.
• 📊 Option writers are aggressively selling calls, suggesting a belief in a potential market downturn.
• 📉 Nifty future is experiencing a significant drop in premium, wiping out 80 points in a single trading session.
• 🔑 The highest open interest is at the 25500 call option, which could indicate resistance at this level.
• 💹 Despite the premium depreciation, domestic institutions continue to buy, which is unusual at all-time highs.
• 📍 The support level is estimated to be between 25,000 to 24,950, with resistance around 25,500 to 25,550.
• 📌 The speaker maintains a bullish view, suggesting that the trend is still up and advises traders to follow the trend.

Q & A

What is the current status of the US markets mentioned in the script?

The US markets are closed for the day.

How are the Asian markets performing according to the script?

Asian markets are mixed.

What is the confusion among retail investors as per the script?

Retail investors are confused about the whereabouts of a $5 billion inflow.

What is the performance of HDFC Bank as mentioned in the script?

HDFC Bank is disappointing.

How are the option premiums behaving according to the script?

Put premiums are increasing while call premiums are decreasing.

What unusual activity is observed in the Nifty future premium as per the script?

The Nifty future premium wiped out 80 points in just a second trading session, which is unusual.

What is the highest open interest according to the script?

The highest open interest is at 25,500, but this is influenced by hedging and margin benefits.

What is the current resistance level for Nifty as per the script?

The resistance level is between 25,500 and 25,550.

What is the support level for Nifty mentioned in the script?

The support level is around 25,000 to 24,950.

What is the behavior of domestic institutions as per the script?

Domestic institutions are continuing to buy even at all-time high levels, which is unusual as they typically book profits.

What is the advice for traders according to the script?

The advice is to maintain a bullish view and follow the trend, as the trend is still up.

Outlines

00:00

📈 Market Analysis and Trading Insights

The speaker discusses the current state of the US and Asian markets, noting the US market is closed and Asian markets are mixed. They highlight the confusion among retail investors regarding a missing $5 billion inflow and the disappointing performance of HDFC Bank. The discussion includes the behavior of put and call premiums, with options writers aggressively selling calls. The speaker summarizes yesterday's trade and predicts similar market behavior for the current day. They also delve into the unusual movement of the Nifty future premium and the open interest in different strike prices, suggesting that the market might see resistance at 25500-25550 and support at 25000-24950. The speaker concludes by maintaining a bullish view, influenced by institutional buying patterns.

05:01

💹 Bullish Market Trends and Strategy

In this paragraph, the speaker continues the discussion on market trends, focusing on the behavior of domestic institutions which are unusually buying at all-time highs instead of booking profits. They describe this as a puzzle and contrast it with typical institutional behavior. The speaker emphasizes the ongoing bullish trend and advises traders to follow it. They recount the previous day's market movements, where the Nifty future premium came down, leading to aggressive selling of call options. The speaker anticipates a potential gap-up scenario that could force these sellers to cover their positions, driving the market higher. They also mention their personal trading position, holding a 25,000 put and a 25,700 call, and express anticipation for the market's next moves.

Keywords

💡US markets closed

This term refers to the temporary shutdown of the United States financial markets, which typically occurs on weekends and public holidays. In the context of the video, it sets the stage for discussing how the closure of the US markets affects global market sentiment and trading strategies, particularly in Asian markets.

💡Asian markets mixed

A mixed market indicates that some stocks or indices are experiencing gains while others are facing losses. In the video, this reflects the uncertainty and varied performance of Asian markets in the absence of the US market's influence, highlighting the complexity of global financial interconnectivity.

💡GI Nifty

GI Nifty refers to the Nifty 50 index, which is a well-diversified 50 stock index accounting for 65% of the free float market capitalization of the National Stock Exchange (NSE). The video discusses how the Nifty index is slightly higher, indicating a positive trend in the Indian stock market despite the US market being closed.

💡Retail confusion

Retail confusion in the video script points to the uncertainty and lack of clarity among individual investors or retail traders regarding market movements and investment strategies. This is a common theme in financial discussions, where retail investors often struggle to interpret market signals amidst institutional trading activities.

💡HDFC bank disappointing

This phrase suggests that the performance of HDFC Bank, one of India's leading financial institutions, has not met market expectations. The video uses this as an example to illustrate how specific stocks can influence overall market sentiment and the decision-making of investors.

💡Option writers

Option writers are individuals or institutions that sell options contracts, expecting to profit from the premiums charged. In the video, the focus is on how option writers are selling calls aggressively, indicating a bearish outlook or a strategy to capitalize on the perceived volatility in the market.

💡Put premiums

Put premiums are the prices paid by buyers to option sellers for the right to sell an underlying asset at a specified price before a certain date. The video discusses how put premiums are going higher, suggesting an increase in bearish sentiment or a hedging strategy by investors to protect against potential market downturns.

💡Call premiums coming down

A decrease in call premiums indicates that the market is less optimistic about the potential for the price of the underlying asset to rise. The video uses this as an indicator of market sentiment, suggesting that investors might be reducing their expectations of significant price increases in the near term.

💡Open interest

Open interest refers to the total number of outstanding contracts that have not been settled. In the video, the discussion of open interest at various strike prices provides insight into market expectations and the concentration of positions, which can influence future price movements.

💡Nifty future premium

The Nifty future premium is the difference in price between the Nifty index and the futures contract based on the Nifty. A falling premium, as mentioned in the video, can signal a weakening of the bullish trend or a shift in market expectations, which is crucial for traders and investors formulating their strategies.

💡Resistance and support levels

Resistance and support levels are price points that tend to offer either a barrier to rising prices (resistance) or a floor to falling prices (support). In the video, these levels are discussed as key indicators for market direction, with 25500-25550 identified as a resistance zone and 25000-24950 as a support zone, based on recent trading activity.

Highlights

US markets closed; Asian markets are mixed with GI Nifty slightly higher.

Retail investors are confused about a missing $5 billion inflow.

HDFC Bank's performance is disappointing, affecting India weeks.

Put premiums are increasing while call premiums are decreasing.

Option writers are aggressively selling calls.

Nifty is going up while Nifty future is coming down, wiping out 80 points premium in a single trading session.

The usual gradual depreciation of premium did not occur; instead, it was a sudden move.

Highest open interest is at the 25,500 strike, but it's influenced by hedging and margin benefits.

The second highest open interest at 25,300 is influenced by both call and put writings, indicating a short straddle position.

After removing hedging influences, the highest open interest is at 25,500, suggesting resistance at this level.

The support level is around 25,000 to 24,950, with 24,975 being a key level where Nifty went long.

Those taking a 25,300 straddle position have a break-even point between 25,100 and 25,500.

Domestic institutions continue to buy at all-time highs, which is unusual as they typically book profits.

The trend is still bullish, and traders are advised to follow the trend.

The Nifty future premium came down, leading some to believe the trend is bending, but the speaker suggests this is typical in a bull market.

The speaker anticipates a gap up that will force aggressive call sellers to cover, pushing the market higher.

The focus remains on the same set of stocks, with no significant changes expected due to the US market being closed.

The speaker holds a 25,000 put and 25,700 call position, created on Friday, and is monitoring potential adjustments.

Transcripts

right us markets closed uh Asian markets

are mixed GI Nifty is slightly higher

and Retail people are totally confused

wondering where is that $5 billion

inflow

HDFC bank is disappointing India weeks

is shooting up put premiums are going

higher and call premiums are coming down

and option wrers are selling calls

aggressively so this is the summary of

yesterday's

trade right and today also uh like say

yesterday it is not US market close US

market you know slightly higher on

Friday and today also it's almost the

same uh just instead of US market

slightly higher we have to use the words

US market closed for today US market

closed Asia is mixed GI Nifty slightly

higher and I'm sure retail will be

confused today

also uh the way markets are you know

behaving uh Nifty is going up and Nifty

future is coming down and Nifty future

wiping out 80 points premium in just a

second trading session in the series

which was

unusual and usually after a week the

premium comes down and towards the end

of the series you know the premium comes

down to 20 30 points you know that uh

depreciation of the premium happens

gradually but what happened yesterday it

was a very very big and sudden

move looking at the open

interest now

25,500 column option as the highest open

interest but if you look at the number

the number will tell you a different

story that's because 26,000 call option

which is the highest open interest now

that's because the sellers also buy

there for hedging and margin benefit the

buyers also buy there so therefore we

have to ignore that the second highest

open interest is at

25300 that also we have to ignore

because you know uh it is not only the

calls are written at 25300 and puts are

also written so that means the people

who are taking short

strle so if you put it in a candle you

know the put candle will be smaller call

calendar will be bigger but you have to

take out that so equalent to put the

equal call you have to take out so that

remaining calls are the naked calls so

that is very very low so if you knock

out these two then the highest open

interest is at

25500 so therefore you know the people

you know the way the future premium is

falling the way the bank Nifty you know

disappointing especially HDFC bank and

the people think 25500 will be the

resistance and maybe another 50 point

you know people who are selling 25500

call will also be selling 25,000 Port so

you know combined premium is about 4050

points so they are not going to lose

even if Nifty Falls to

24950 or even if it goes to

25550 so we can say 25500 to 25550 is a

resistance we have three more trading

sessions a support there is no need to

talk about the support

24975 is when the Nifty became long so

now that resistance will become a

support now so roughly we can say 25,000

to 24950 is a support on the

downside the people who are taking 25300

stradle also so the combined premium is

about 200 rupees you know so the break

even will be 25100 to

25500 and of course you have to keep

another 500 point you know because they

will be doing some kind of an

adjustments the people who are doing the

strategy they won't be deploying the

full capital

so all in all you know uh it is time to

maintain the bullish view even now and

because look at the way institutions are

pouring in the

money

yesterday both FAS and Das were n buyers

on Friday both F and Das were n

buyers and like faia buying you know we

can understand because there is a

compulsion for them to deploy 5 billion

you know because of MS balance this and

that but why the domestic institutions

keep on buying even at this level

whether Market is you know keep on

making alltime high this domestic

institutions keep on buying so that's a

real puzzle and usually that is not the

behavior of the domestic institutions

when the markets are at alltime high

they will tend to book The Profit but

this time they are not booking the

profits so therefore you know if you're

a Trader the trend is up still and trend

is your friend until it bends you know

yesterday the Nifty future premium came

down the people thought no it's bending

so that's why they sold aggressive call

options but let me tell you the real

bull market will work like this only so

they will give you the hope for bulls

that markets have reversed sorry they'll

give a hope for the beers that the

market has

reversed they'll make them to sell

aggressive calls then something one of

the other good thing happen Gap up then

these people have to run for cover so

Market moves higher so let us see

whether that happens today or not so

otherwise it is the same set of stocks

uh that will be in Focus uh there is

nothing big change because US market is

close and you know uh things are

expected to be flat you know based on

the FI Buy sell you know there may be

slight premium you know yesterday both

fa and were not buyers and that's why

the GI Nifty is IND getting 1020 Point

higher opening otherwise it will be

opening 1020 Point lower so that's

nothing up to 50 to 100 Point move you

know the time value people will make

money so let us see so I also have

25,000 put and

25,700 call I think I told you already

yesterday which I created on Friday I'm

still holding it so let us see whether

I'm going to make full profit or I may

have to do some adjustments along the

way so that's it for now hope you

enjoyed watching this video thank you

for watching