First Expiry Shows Speculative Traders Embracing Nifty Weekly Options

Nifty 50 weekly options ended with more than 3.15 times the volumes of the monthly options in the inaugural four-day week as speculative trading shifted to shorter-duration contracts.

Volumes in call options expiring on Feb. 14 was 3.4 times the volume of similar contracts for Feb. 28 expiry, according to data available on the National Stock Exchange website. Volumes of the weekly put contracts were 2.85 times the monthly options.

A call option gives the buyer the right to exercise the option if the underlying security rises above a specific price. A put option gives the right to sell if the price falls below a specific level.

Open interest, or the number of outstanding contracts, showed concentration in Nifty Weekly calls. Because the markets were weak, there were more call writers as opposed to put writers. As a result, open interest build-up was higher in weekly call options than put contracts.

The Nifty fell 184 points in four days, declining in each session. The weekly put-call ratio was quoting below one, indicating weakness in the near term. The put-call ratio for Feb. 28 contract is above one, indicating a bullish trend going into the monthly expiry.

Being the first weekly expiry, the premium was much higher than the monthly contract, according to Gaurav Bissa of LKP Securities. That means it was beneficial for sellers than buyers, he said.

Usually, premium is lower for short-duration contracts as the investor takes a risk for a shorter period compared to the monthly contract where there’s more time to manage risks.

The open interest data showed that the participation in Nifty weekly call options was much better than the Nifty Bank weekly contract.