India’s benchmark Nifty future was dominated by institutional buyers in today’s session. The index surprised everyone by registering all time high of 12200, despite a flattish opening around 12082. In today’s article we shall discuss how the institutional buyers successfully pulled off a painfully slow upside run of 145 points between 12055 and 12200.
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 couple of days. 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, they were long both in the OTM Call and Put strikes. To learn more about this, read our article posted on 13th December 2019.
Yesterday’s Fall & Today’s Flat Opening
On Monday, Nifty slipped 78 points after registering a high of 12152 in the morning. What you need to notice here is, whether the fall is aggressive or not. On Monday it was not at all a sharp fall, as the market makers were primarily booking profits in their overnight long positions, by selling the Call first and holding on to the Put. The most important thing to note was, although market had fallen and the index registered a low of 12074, the institutional traders did not buy fresh Put options, they simply squared off the Put after all the Calls were squared-off. So how can retail traders take advantage of such a situation?
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 Tuesday morning. When the market opened today, the institutional traders started building long positions again. Now the decision making is easy. This is exactly what we did; we went long in the 12200 Call @ Rs.12. Thereafter Nifty future witnessed a slow upside rally of 106 points. The Call doubled and registered a high of Rs.29.
Buy Trade Of 12200 Call Option Weekly Expiry