How Large Institutions Played Bank Nifty
India’s Banking benchmark Bank Nifty futures rallied 1,581 points in the past four sessions. A 3D Delta scan over the past four trading sessions has revealed that the major volume of the institutional positions is being accumulated in the May 2024 contract. Traders need to note that the primary reason why the market rose was the tactical wrapping up of their existing Call Ratio in the April 2024 contract.
Red circles are the buyers who started building positions right from Wednesday (24th April 2024)
Why Bank Nifty Call Options Rose Exponentially
Bank Nifty call options rose exponentially in today’s session. The index was hit by volatility, as it swung up 1,081 points from the low of 48,497 and made a high of 49,581 approx. The 3D Delta system indicated in the morning that institutional traders had entered the market and bought Bank Nifty Call options. Today’s upside swing was meticulously planned ahead of time. The institutional traders waited for the Gamma-Vega covariance factors to fall in line with the Binomial price and then went for the kill. The Call options for e.g. 49,000 CE of 30th April 2024 expiry witnessed a massive swing from the low of INR 38 to register a high of INR 582 approx.
How Did They Pull Off Such A Trade
Institutional traders used IV Estimation to pinpoint today’s big opportunity. Bank Nifty contracts trigger IV swings at least once every week as we had mentioned earlier. The banking index throws up massive opportunities for intraday traders in these time bands. These are the zones where the Institutional Traders enter the market and trigger their trades. The returns as we all witnessed today was explosive in nature. The 49,000-Call strike generated a whopping 1,431% return intraday!
Re-Constructing Today’s Session
Institutional traders entered the market early today. The 3D Delta software captured their entry point with extreme precision. To test the accuracy of the system, various Put option contracts were sold right from 9:30 AM, exactly where the institutional traders entered. The system also calculated that Binomial pricing and the covariance factors were used to generate the entry and indicated an upside target of 49,684. Put option strikes from 48,500 PE to 49,100 PE, all were sold with their hedges. Call spreads were made by buying 49,000 CE which is still in the system.
