Early surge fizzles in anaemic volume
PROFIT-TAKING in Hang Seng Index futures took its toll on March contract trading despite a strong opening yesterday.
Volume was anaemic at 11,419 contracts.
March futures opened strongly at 11,330, 130 points ahead of the Friday 11,260 close. The high of the day was reached soon after the opening of trading at 11,350.
Sellers got stuck in from about 10.20am onwards. There was a brief attempt to take the contract to the high of the day again, but the sellers and profit-takers got the upper hand. Brokers said there was strong retail profit-taking near the intra-day highs.
The contract saw a low near the close of 11,230. March closed 60 points up at 11,260, a premium to the cash of six points. April futures, after opening at 11,355, the high of the day, eventually closed at 11,275, having seen a low of 11,250. The close was a premium to the cash of 21 points.
There were 11,023 contracts traded in March and 396 contracts in April.
In index options implied volatility slipped to about 19.5 per cent, at-the-money, in the front month. Implied volatility has seen recent highs of about 22.5 per cent. In April the derivative yardstick was about 20 per cent. In June at-the-money implied volatility was at 21.5 per cent and in September it was 23.5 per cent.
Jardine Fleming said investors in options had not been expecting a big move in the market yesterday and were caught off guard by the strong opening. 'Bulls traded March 11,400-11,600 call spreads while bears put on March 10,400-11,000 spreads,' the brokerage said.
In stock options there were 3,068 lots traded in HSBC, representing 90 per cent of the cash turnover.
Open interest in futures for March was 44,012 contracts. In April it was 727 contracts and in June it was 4,899 contracts. Overall open interest was at 49,788 contracts. This relatively big open interest so early in the month bodes well for investor sentiment ahead with the market remaining firmly supported at present levels.
The upside ahead remains capped at 11,550 in the absence of a big surge in momentum. Strong profit-taking is expected at this level. There is, on the downside, support at 11,220.