Stocks Closed for Fresh F&O Bets at High­est Since Sept

As many as nine stock fu­tures have been barred, which mar­ket watch­ers say points to over-optimism among traders in the mid-cap space

The Economic Times - - Markets & Commodities -

Mum­bai: The sharp re­bound in the stock mar­ket of late may have made traders com­pla­cent, en­cour­ag­ing them to build up po­si­tions in var­i­ous stock de­riv­a­tive con­tracts to their high­est per­mis­si­ble limit.

The num­ber of stock fu­tures and op­tions in which fur­ther bets can­not be mounted is near their record lev­els in Septem­ber last year. Usu­ally, when higher num­ber of stocks is moved into the trad­ing ban list, some mar­ket watch­ers con­sider this as a con­trar­ian in­di­ca­tor.

As many as nine stock fu­tures can­not be traded fur­ther till some of the po­si­tions are liq­ui­dated. The stocks un­der ban in fu­tures and op­tions for Mon­day in­clude Ceat, Hous­ing De­vel­op­ment and In­fra­struc­ture, In­di­a­b­ulls Real Es­tate, IFCI, Jet Airways, Jin­dal Steel and Power, Union Bank of In­dia and Jaiprakash As­so­ci­ates.

A stock goes un­der ban in fu­tures and op­tions (F&O) seg­ment when com­bined open in­ter­est in its de­riv­a­tive con­tracts crosses 95% of the mar­ket-wide po­si­tion limit. The nor­mal trad­ing in the stock is re­sumed only after the ag­gre­gate open in­ter­est across ex­changes drops to 80% or be­low of the mar­ket wide po­si­tion limit.

In Septem­ber, as many as 12 stocks came un­der ban on par­tic­u­lar days — the high­est since 2007-08, the peak of the pre­vi­ous bull run.

“It in­di­cates that trad­ing sen­ti­ments are high, peo­ple are very com­fort­able tak­ing po­si­tions and are over-op­ti­mistic in the mid-cap space,” said Ashish Chatur­mo­hta, head-tech­ni­cals and de­riv­a­tives at Sanc­tum Wealth Man­age­ment. The BSE MidCap index has surged 11.6% so far this year to 13,422.89 points com­pared to the bench­mark Sen­sex which has gained 8.4%.

De­riv­a­tive an­a­lysts said the in- creased num­ber of stocks un­der ban could also be partly due to high lot sizes. The rise in num­ber of stocks un­der trad­ing ban and the de­cline in the Volatil­ity Index (VIX) — a mea­sure of traders’ ex­pec­ta­tions of near-term risks in the mar­ket based on Nifty op­tions pre­mium val­ues — are point­ing to a rise in com­pla­cency among traders. VIX has drifted lower to 13.43 in re­cent weeks. The mea­sure had hit 12.75 in Septem­ber — its low­est lev­els since De­cem­ber 2014.

While the num­ber of stock de­riv­a­tive con­tracts un­der trad­ing ban are near their highs, ac­tiv­ity of the re­tail in­vestor seg­ment in fu­tures and op­tions is still low, said bro­kers. “Given strong liq­uid­ity con­di­tions, all fac­tors point­ing to a blow-out top are not in place yet,” said S Har­i­ha­ran, head of sales trad­ing at Emkay Global. “The re­tail seg­ment sin­gle stock fu­tures long in­ter­est at about $5.5 bil­lion is still rel­a­tively low com­pared to typ­i­cal highs of $7.7 bil­lion.”

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