01Cold open: the market changed over the weekend
Saturday morning Donald Trump posted that Iran needs to, in his words, get moving, or there won't be anything left. Brent crude climbed 4 dollars over the weekend. Bitcoin dropped 1300 dollars. The rupee held at 95.96 only because Indian markets were shut.
So the market we left on Friday is not the market we open today.
This is The Tanmay Edge.
02Hook: what pro did on Friday
On Friday something rare happened on the option chain. The biggest desk in the room, the one I track as Pro, bought 1,17,484 call contracts. Same desk, same day, also bought 1,13,445 put contracts.
2,30,000 fresh contracts in one session. On both sides.
When a desk pays money for upside and downside at the same time, it is not predicting which way the market goes. It is paying to be in the room when the market moves. Either way.
Pro was telling us on Friday evening that this week is not going to sit quietly. Today is the day they paid for.
03Tension: the weekend rollover
Then the weekend happened. Saturday Trump rejected another Iran ceasefire round. By Sunday afternoon Brent crude touched 113 dollars a barrel. That is 4 dollars above where we closed Friday. WTI sits at 107.
Brent at 113 means Indian oil companies pay more for every barrel they import. The rupee weakens because India sends more dollars out to pay for that oil. The rupee already touched 96 against the dollar on Friday for the first time on record.
Across the Pacific, Wall Street had a bad Friday too. The S and P 500 fell 1.24 percent in one session. The Nasdaq fell 1.54. Both indexes were at all time highs on Thursday evening. The Trump Xi summit produced no deal. Tech stocks bled into Friday close.
Over the weekend Bitcoin slid another 1300 dollars to 78,030. Ethereum cracked to 2177. The 10 month low.
The picture is unchanged in one sentence. Risk is leaking out of every asset that ran up in April.
This morning GIFT Nifty trades at 23,561. Down 146 points. Down 0.62 percent. We open about 80 points below where we closed Friday.
04Climax: the level that decides the day
Here is the question that decides today's trade.
The market opens at 23,561. About 60 points above 23,500. At the 23,500 strike, traders have bought 7.4 million put contracts for this week's expiry. That is the biggest single position on the entire chain.
Translation. A lot of people have paid a lot of money to be protected if the market falls to 23,500. If the market goes there today, the sellers of those puts have to defend the level. Sometimes that defence works. Sometimes it breaks.
That is question number one. Does 23,500 hold in the first hour, or does it crack.
Now tomorrow. Tuesday is Nifty weekly expiry. On expiry day the market usually drifts to the level where most option sellers walk away with the money. That level for this week is 23,700.
So today the market opens at 23,561, with 23,500 below it as a defended level, and 23,700 above it as the magnet for tomorrow's close.
That gives us a corridor. 23,500 to 23,700. 200 points wide. Today moves inside that corridor. Or it breaks it.
The Friday option market readiness reading was 15.01 percent. By 8 in the morning today that reading jumped to 17.78. The option market expanded 18 percent overnight without a single share trading. That is the movement Pro paid for.
Today is not a sit and wait day. Today is a movement day.
05Resolution: the trade plan in three steps
Plan for today. Three steps in order. Plain language.
Step one. Do not chase the opening dip. The market opens 80 points red. Let it test 23,500. If 23,500 holds in the first 30 minutes, a bounce will come back toward 23,700. That is the magnet of the chain.
Step two. Sell the bounce when it gets to 23,650 or 23,700. Do not buy into strength. The chain wants 23,700 by tomorrow afternoon but Pro has paid for movement on the way there. Sell the rally and wait for the second leg down.
Step three. Wait for a base to form. It will print somewhere between 23,400 and 23,550 depending on whether 23,500 cracked. Once that base holds for 15 to 20 minutes, go long. Target the same 23,700 magnet. That is where Tuesday wants to close.
Stop loss tight under the base. If 23,500 breaks and stays broken, the next level down is 23,000. That is a 500 point air pocket.
A simpler version for the smaller account. Buy a 23,500 put at 103 rupees. Buy a 23,800 call at 87 rupees. Total cost 190 rupees per unit. If the market goes below 23,310 today, the put pays. If the market goes above 23,990 today, the call pays. If both happen today, both pay. That structure costs less than the price of a single share of most Nifty constituents.
Do not sell options today. The desks that paid for movement on Friday are sitting on the other side of every option seller this morning. Time value will bleed slower than the price moves. The sellers lose first.
06What is working: what is not
Look where the money is hiding. Pharma went up 0.34 on Friday despite the broad sell off. Healthcare went up 0.25. FMCG up 0.54. Media up 1.98. Defensive sectors. Companies that earn even when the macro stays ugly.
Look where the money is leaving. PSU Bank down 1.80 on RBI broker rules plus higher bond yields. Real estate down 1.79. Metal down 1.93 because China sentiment turned negative over the weekend. Oil companies down 1.67 because higher Brent compresses their refining margin if they cannot pass the cost to the pump.
Stay with the defensives this week. Stay away from rate sensitive names. Do not buy the dip in metal until China sentiment turns.
One catalyst today. Indian Oil Corporation reports its annual results post close. Watch how the stock reacts at the open. Refining margin commentary will be the tell for the rest of the OMC pack this week.
One product launch today. NSE starts trading Electronic Gold Receipts. Day 1. Watch the volume. If retail picks it up, MCX silver and gold open interest will reshape over the next two weeks.
07FII DII turn
One last data point and then we wrap.
On Friday foreign investors bought 1329 crore of Indian shares in cash. After 5 sessions of selling that was the first positive print. Domestic mutual funds sold 1959 crore in the same session. The domestic side took some profit while foreigners covered short positions.
Year to date the domestic mutual fund flow has overtaken the foreign investor outflow for the first time this year. That is the structural backstop holding the market up while Brent and the rupee fight on the surface.
08Tag: help the chain settle
RupeeCase Nifty 10 absorbs this kind of week. The portfolio holds through Pro's movement days. Track it live on rupeecase dot com.
Today is the day Pro paid for on Friday. Do not chase the open. Sell the bounce. Wait for the base. Go long for the move back to 23,700. Tomorrow is expiry. The chain wants to settle at 23,700. Help it.
This was The Tanmay Edge. New episode every trading day at 8.30 AM IST. Streaming free on rupeecase dot com. Also on Apple Podcasts, Spotify, Amazon Music, YouTube. Like, subscribe, share. Back tomorrow with the expiry read.