How come taking short trade seems more difficult than a going long?

I somehow find taking long trades is easier than short trades. May be because we are taught to do "good things" or "right things" .. short trade doesn't come naturally to us.

Samir Arora - one of the few I like to listen to has an interesting interview here - http://www.moneycontrol.com/news/market-edge/market-rallies-is-it-time-to-book-profits_483839.html

And the answer to the last question is what I liked the most:

Q: And you are sure that it’s not time to cut the shorts in telecom because Bharti has had a good run from Rs 260 to Rs 350?

A: That is basically, according to me, only ensuring my next years performance will also be good because I need some buffers for next year. It’s actually not Bharti per se, but the whole sector will become a bit of a joke with this sea of Etisalat coming into India and not appointing investment bankers, but only telling the press that he is interested in R COMM, no-no I am actually interested in Idea also, no-no I am interested in a third company. Where have we heard of a guy wanting to buy a company first announcing to the world that they are interested? I don’t know, maybe I have not tracked their stock, maybe they get a boost every time they say they are coming to India or even planning a visit. But it is unheard of for somebody to say upfront that you know I maybe interested in this company, so take it up 5% so that when I buy it, it becomes more expensive for me, stuff like that. So, I have, every day this kind of news coming in and we remain, it doesn’t matter, we are long short, we have to have something on the short side, so it doesn’t matter whether its telecom or commodity. It’s an intellectual business as much as actual returns and so we get intellectual satisfaction from some of the shorts. So, we will remain short.

May be if we approach the short trades as an "intellectual endeavor" it might take the burden of "doing good things" off the mind.

Options/futures data for 3rd Sep (EOD)

1. 5400PE stands out as something that's history defying. In my 12 months of tracking OI of puts/calls, I have never seen 1.14Cr OI on any put/call in the very first week of a series. The simple interpretation is 5400 put writers will defend this market. The only negative I attach to this is if put writers have done put back spread trade where they sell 5400PE & buy lower level PEs. In that case its dangerous because these put writers will cover the puts very fast if there is a very fast fall.
2. Calls at 5500/5600 are still getting added with 5500 being the resistance now. But we wont stay in the 5400-5500 range for sure. Something has to give way next week.

3. What's bullish is 5500PEs are also being added - almost 30% increase in OI this week. So upside can easily come if more 5500PEs are added and 5500CEs covered.

4. Lower levels puts addition has slowed down towards the end of this week which is reflected in the PCR reduction from 1.48 last week to 1.38 now. But still this is the first time I have seen 80-90L OI on lower level puts in the very first week of a series.

Nifty Futures:

3.4Cr OI up 2.6%

Banknifty Futures:

25L OI up 2.3%

To end this analysis -- I see a dire warning in this market for sure. This is an options dominated market with futures at one of the highest OI ever. If for whatever reason this market breaks that sacrosanct 5350 level - the fall will just accelerate because the put writers who now seem like heroes will be forced to cover and the buyers sure will not give them time to cover - as gap downs could just be too big.

And another warning if you are considering naked put writing as way to make easy money because the market has not fallen in last couple of months - remember law of averages will eventually catch up as it did in almost equal intervals "July 2009-Oct 2009-Jan 2010-May2010 -....? 2010"

Options/futures data for 30th AUG (EOD)

Summary:

1. High OI at 5400PE provides support for this market. Only issue is we are starting the series with a high PCR of 1.43. Nifty tops out at PCR of 1.8 and above as seen in June (21st @5370+) and few days back in August 5540. So we will be actively watching for that.

2. Lower level puts have added a lot of OI. Looking at higher OI @5400PE & 5200PE - compared to 5300PE, my suspicion is big money has done some put backspread - that means sell 1 lot of 5400PE and buy 2 lots of 5200PE. This guess is based on current data - of course things can change if Nifty scales 5485/5510.

Nifty Futures:

3.23Cr OI up 0.5%

Banknifty Futures:

24L OI up 1.2%

Options/futures data for 27th AUG (EOD)

Summary:

1. Close to 90L OI at 5400PE provides good support for this market. Although I remember in May we had something like 74L OI at 5200 on the very first day of series but still Market fell to 4800. The way the market makers made the fall was by adding calls at 5200/5100 gradually and FIIs had bought huge amount of lower level (5000/4900/4800 ...) puts.

2. 5400CEs too added 12L on Friday! That's not good at all.

Nifty futures:

3.2Cr OI up 2%

Banknifty Futures:

24L OI up 0.84%

The only way scepticism in the market goes away is if 5510 is reached in a couple of days. 5465 & 5485-5490 will still provide resistance.

Options/futures data for 25th Aug (EOD)

Summary:

1. Well the 5500PEs are under pressure for past two days. So far 26L have unwound in last two days. Its upto the rest of writers holding the 65L OI to defend Nifty.

2. 10L 5500CEs added today. Will there be a run on these guys tomorrow?

Monthly profile:

Nifty back below monthly VAH. If 5465-5450 range is defended tomorrow's expiry can be closer to 5500.

VWAP for entire month as of last Friday was 5445 (source Karvy newsletter). So 5431 and 5445 are very important levels for bulls.

Options/futures data for 24rd Aug (EOD)

Summary:
1. Not very big change in options front. The only highlight of yesterday was 11L puts covering at 5500. I still don't see it a big alarming factor until another 20-30L 5500PEs cover. Only if that happens Nifty might go down and expire lower.
2. 5500CE writers are not covering much so expiry at my previous expectation of 5480-5520 is still valid.

Nifty futures:
AUG: 2.4Cr OI down 18% (55L shares cut)
SEP: 1.67Cr OI up 58% (61L shares added) -- again evidence of strong rollovers for the last 3-4 days with premium for next series.

Banknifty futures:
AUG: 19L Oi down 28% (7.7L shares cut)
SEP: 15L OI up 86% (7L shares added) -- discount seen yesterday in rollovers for next series.

Options/futures data for 23rd Aug (EOD)

Summary:

1. Well one thing is clear -- the expiry level will be now determined by what the the 5500CE writers will do in next couple of days. If more 5500CEs cover -- stronger expiry above 5500 (say 5560-5580).

2. The way puts are being added - its getting scarier now. "Too much is too bad" is the right one that comes to my mind. PCR (Put-Call-Ratio) has gone up to 1.72 yesterday. Once it reaches 1.8-2.0 range the market upside will be capped and one can look for reversal from there.

The last time we hit PCR of 1.8+ was on June 21st when Nifty reached 5370+ (futures) but promptly reversed the same day and 24th June expiry happened at 5320.

Nifty Futures:

AUG: 2.95Cr OI down 8% (26L shares cut from OI)

SEP: 1.05Cr OI up 45% (33L shares added to OI)

Is this one of the HIGHEST OI ever on Nifty? I will compare this to Jan 2008 OI by tomorrow

Banknifty Futures:

27L OI down 6.2% (1.8L shares cut from OI)

8L OI up 27% (1.7L shares added to OI)

For chartists - Banknifty had a double top with RSI divergence on 15-min chart yesterday.