The Nifty July futures traded at a discount of 55-60 points during most of the session and closed with a gap of 68 points as bears held on to their short positions.
The Nifty August futures ended at 3960, a 12 points discount to July futures, while adding open interest of 60,950 shares. Some operators are creating short positions in far-month contracts on expectations of a deeper correction.
The ray of hope for bulls is that open interest in Nifty July futures rose only marginally by 12,829 contracts on Monday despite trading volumes of 587,996 contracts. This means that intra-day positions were squared off and no fresh short positions were carried forward.
Options trading suggests that Nifty is likely to test 4000 very soon and support is building up at the 3950 and 3900 levels.
The operators were seen unwinding their put positions at 4000 and 4100 strike prices, while call options buying took place at the strike price of 3900. The Put OI at 4100 and 4000 strike prices declined by over 250,000 shares each, largely on account of unwinding. This indicates that put writers expect the Nifty to fall below these levels.
The Nifty has support at 3900 as call and put buying was seen at the 3900 strike price. The 3900 put options added 946,250 shares and 3900 Call options added 134,200 shares in open interest.
