India’s benchmark Nifty future was dominated by Institutional Buyers in last 7 trading sessions. The index surprised everyone by registering all time high of 20,222. In today’s article we shall discuss how the institutional buyers successfully pulled off a painfully smooth upside run of 1000 points between 19,223 and 20,222.
Picture Source - PersonalFN
The Inception Point
In order to understand the starting point of this slow Bull Run, let us take a close look at what the institutional traders did in the last two weeks. Under normal circumstances, market makers would generally buy Call options and short Put options during a bull run. Surprising as it may sound, last Friday(08/09), they were long both in the OTM Call and Put strikes(Short Put).
Journey of last 2 weeks
Right from 1st September, Nifty has been rising everyday with minor profit booking in the middle of the day and rising back again. Why? As soon as Put sellers book their position, market falls a little and as there is no follow up demand for Puts at lower level, those same Puts are then sold which lifts the market up. This has been the behaviour of the market since last two weeks. 7th September 2023, our premium calculation told us to sell the range of 19,900 CE and 19,550 PE (monthly contract strikes) with either strike SL of INR 146. The very next day (08/09), 19,900 CE crossed 146, that was the trigger of Put sellers dominating the market and Call sellers giving up. The same call of 19,900 CE touched 408 today(15/09).
The Smart Trade Execution
At this point what you can do is very simple, you must never jump to a conclusion. The intelligent thing to do is waiting till you know what the market makers would do, when market opens on Monday morning. When the market opened, the institutional traders started building long positions again. Now the decision making is easy, since we were aware about dominance of Put sellers and Call sellers giving up 19,900 territory and all this indicated a long built on 8th Sept (Friday) itself. Such SL brings a quick movement. This is exactly what we did; we went long in the 20,000 Call (14th Sept expiry) at INR 27 on 08/09. Thereafter Nifty future witnessed a gap up of 72 points on 11/09 (Monday) followed by a painfully smooth upside rally of 159 points. The Call doubled and we booked at INR 58 and the calls went on and registered a high of INR 84.