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Thursday, November 22, 2007

18% rollover of open positions seen on Nifty futures


On a volatile trading day, the Nifty futures swung wildly around the Nifty spot.

The Nifty future witnessed a sharp turnaround on account of heavy short covering particularly during fag end of the trading.

Directional call

The Nifty November future closed at 5536.20, a premium of about 16.85 points with respect to the spot close.

Rollover of open interest position to December series was just 18 per cent, indicating that investors are not willing to take a directional call on the market.

However, the premium was better at 20.45 points for Nifty December futures and saw an addition of about 27 per cent in open interest positions.

The top five contracts based on open interest positions are Reliance Petroleum, IFCI, RNRL, Tata Teleservices (M) and PowerGrid Corporation. Among stocks futures, Reliance Capital, GMR Infra and SBI were star performers as they gained 7.8 per cent, 4.7 per cent and 4 per cent respectively.

While Reliance Capital and GMR Infra witnessed accumulation of open interest positions, SBI saw a sharp drop of 10 per cent in open interest positions.

FIIs selling

After pumping out Rs 4,200 crore on Tuesday, they sold another Rs 2,138 crore on Wednesday.

They mainly offloaded index futures. They hold Rs 16,985 crore of index futures against Tuesday’s figure of Rs 15,801 crore. This indicates they added lot of short positions on index futures.

Securities ban

The NSE has banned derivative contracts of NIIT Technologies, IFCI, Adlabs Films and Reliance Petroleum as open interest positions have crossed the 95 per cent of the market wide position limit.

Source - Hindu Business Line

Posted by Srivatsan at 12:06 PM

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Understanding Short Term Trading

Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.

Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.

Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.

Types of Moving Averages

1) Simple Moving Average (SMA)

SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.

2) Exponential Moving Average (EMA)

EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.

The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.

A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.

In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.

Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.

Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.