Open Interest Analysis

[praveen98]

Nifty 10332 (+6) BankNifty 24873(+113)

Nifty futures open Interest increased by +2.8% indicating addition of fresh short positions, irrespective of Nifty(spot) staying above 10300 levels Shorts that was created on April 04th remained intact indicating traders are expecting market to break below 10250 and 10200 amidst weak global indices.

OI in BankNifty declined by -2.4% indicating wind up of short position as BankNifty(spot) neared 25000 levels. Technically, BankNifty(spot) would find 25000-25050 as tough resistance, it has to close above 25050 for any further up side. On the other hand, 24550 would be the near by support.
View attachment 24702

Dear Jayakumar,
How can we say it is short addition and not long position addition? I think market is bullish in short term so OI addition is from long side...Can you tell me the rationale behind the conclusion that OI addition in NF is on Short side? If it is Weak global indices then one can say reduced OI in BNF is long unwinding...How can we say it is short unwinding?
I appreciate your efforts on a tricky concept...
Best Regards,
Praveen

 

[travi]

Dear Jayakumar,
How can we say it is short addition and not long position addition? I think market is bullish in short term so OI addition is from long side...Can you tell me the rationale behind the conclusion that OI addition in NF is on Short side? If it is Weak global indices then one can say reduced OI in BNF is long unwinding...How can we say it is short unwinding?
I appreciate your efforts on a tricky concept...
Best Regards,
Praveen

IMHO the +OI and -OI methodology held good once a upon a time probably more than 3 decades ago

Since HFT, arbitrage trading and program trading have come, around the 80's in US mkts and a bit later in Indian mkts, this concept has not stuck very well and I've given up on it a very long time ago.
Nowadays, if there is a huge demand of Longs in say NF, 30k Futures want to be bought but there is no real seller. (The BEAR)
The arbitrage/Program/HFT/Algo will quickly (i'm talking in seconds or lesser) jump in and add fresh OI but also take opp. positions in its underlying.

Incase of stocks, it can directly buy the spot in equal value but for eg. in Index Futures, it will programmatically take positions in options or something.
That's why those black boxes cost million of $$$

Since Fresh OI has been added, you will imply more BEARish tone but the fact is there isn't. same goes with unwinding etc.
Yes, I've seen its real effect but for that you need a huge % of OI to change in a short TF say couple of hours to catch real Sellers getting in or out.
something like +/-10% or more. small daily OI changes have not conclusively worked for me.

 

[Raj232]

Okay, noted a thing from your screenshot. We'll certainly try and implement it on our platform.

Sirjee, please implement it quicky on your platform. I know you have lots on your plate and bracket order with trailing stop is taking more than 6 months already. BSE has now introduced MT5 (Meta Trader 5) with automation .. there lots to catch up

However, sorry to say, I will still be visiting posts of @Jayakumar.int ji for reference. Thank you!!

And many thanks @Jayakumar.in ji for posting daily your esteemed analysis

 

[newmanin]

A question-
for open interest. - generally it require a trade to happen and a volume to generate.
scenario one - there's zero open interest and zero volume on Expiry of NIFTY option on any given day. so if by theoretically there's estimated value will be there in terminal window. ( if there's no bid or ask available - how this value comes out) and if i want to trade and option means generate on open interest, without any other counter party availability, how to make this trade happen?

example - how can i trade an option of 10400CE- NIFTY 27SEPT.?

 

[Tejas Khoday]

Sirjee, please implement it quicky on your platform. I know you have lots on your plate and bracket order with trailing stop is taking more than 6 months already. BSE has now introduced MT5 (Meta Trader 5) with automation .. there lots to catch up

However, sorry to say, I will still be visiting posts of @Jayakumar.int ji for reference. Thank you!!

And many thanks @Jayakumar.in ji for posting daily your esteemed analysis

Hi @Raj232 ,

1. We are currently working on the finer details of Bracket Order. It will be done in a month or so. We didn't want to introduce both Cover & Bracket Orders at the same time because we wanted to resolve issues if there were any. Now that the implementation has been successful, we will do this one as well.
   
   
2. Yes, we are aware of MT5. Will look into it when we become a member of BSE.

 

[Jayakumar.int]

Dear Jayakumar,
How can we say it is short addition and not long position addition? I think market is bullish in short term so OI addition is from long side...Can you tell me the rationale behind the conclusion that OI addition in NF is on Short side? If it is Weak global indices then one can say reduced OI in BNF is long unwinding...How can we say it is short unwinding?
I appreciate your efforts on a tricky concept...
Best Regards,
Praveen

Dear Praveen,
To analyze OI take data before(rollover) and after new contract begins to know the prevailing trend. For Example: Take April cont. Nifty(spot) trend was positive as it took support above 10,000(it’s a psychological level) but once it break above 200DMA around 10180, Shorts got wind up and marginal longs were created on April 03rd,in the next session there was sudden crash and Nifty once again slipped below its 200DMA. On this day huge shorts were created expecting a further fall in both Nifty and BankNifty.
On the very next day market had a gap-up opening denying chance for Short covering, but in BankNifty after RBI’s meeting it went up sharply on Short covering(see the next day’s OI). Market can go up based on Fresh longs or Short covering. In this case it was based on Short covering.
For Nifty, short covering is yet to come(see the OI data), now the question comes how iam saying it short covering, for this I keenly track the last 45-60 mins of trade and OI data that gets updated after market hours then combine both and decide accordingly, if Nifty or BankNifty jumps very fast as in the case of Thursday’s session(BankNifty) then it can be said as short covering.
In the last two session, take intraday chart for Nifty, to me I feel Nifty lacks strength its going up on BankNifty’s strength. So there are two scenarios possible in coming days, if Nifty manages to stay above 10290 there may be slow short covering, if Nifty breaks and stay above 10400 there may be heavy short covering. To fall it has to break below 10290.
At last, Iam add my experience into these data’s.

 

[Jayakumar.int]

A question-
for open interest. - generally it require a trade to happen and a volume to generate.
scenario one - there's zero open interest and zero volume on Expiry of NIFTY option on any given day. so if by theoretically there's estimated value will be there in terminal window. ( if there's no bid or ask available - how this value comes out) and if i want to trade and option means generate on open interest, without any other counter party availability, how to make this trade happen?

example - how can i trade an option of 10400CE- NIFTY 27SEPT.?

For both futures & Option underlying is spot, so first track underlying then OI. For speculation don't go for Sept cont try in Apr or May, there will be low volumes and it would be of high premium.

 

[Jayakumar.int]

Nifty 10379(+48) BankNifty 25094(+221)

Nifty futures open Interest increased by +1.8% indicating addition of long positions. Technically, Nifty(spot) would stay with positive bias above 10290 levels, it may aim for its next resistance of of 10430-10450 levels.

OI in BankNifty declined by -1.7% indicating wind up of Short positions. Technically, BankNifty(spot) may stay with positive bias above 24900 levels, any stay above 25000 may head towards 25350-25450 levels.

 

[praveen98]

Dear Praveen,
To analyze OI take data before(rollover) and after new contract begins to know the prevailing trend. For Example: Take April cont. Nifty(spot) trend was positive as it took support above 10,000(it’s a psychological level) but once it break above 200DMA around 10180, Shorts got wind up and marginal longs were created on April 03rd,in the next session there was sudden crash and Nifty once again slipped below its 200DMA. On this day huge shorts were created expecting a further fall in both Nifty and BankNifty.
On the very next day market had a gap-up opening denying chance for Short covering, but in BankNifty after RBI’s meeting it went up sharply on Short covering(see the next day’s OI). Market can go up based on Fresh longs or Short covering. In this case it was based on Short covering.
For Nifty, short covering is yet to come(see the OI data), now the question comes how iam saying it short covering, for this I keenly track the last 45-60 mins of trade and OI data that gets updated after market hours then combine both and decide accordingly, if Nifty or BankNifty jumps very fast as in the case of Thursday’s session(BankNifty) then it can be said as short covering.
In the last two session, take intraday chart for Nifty, to me I feel Nifty lacks strength its going up on BankNifty’s strength. So there are two scenarios possible in coming days, if Nifty manages to stay above 10290 there may be slow short covering, if Nifty breaks and stay above 10400 there may be heavy short covering. To fall it has to break below 10290.
At last, Iam add my experience into these data’s.

Hi Jaya Kumar,
Thank you...for explaining how you are analyzing OI

 

[newmanin]

For both futures & Option underlying is spot, so first track underlying then OI. For speculation don't go for Sept cont try in Apr or May, there will be low volumes and it would be of high premium.

.

thanks for reply. and for your guidance. but this doesn't answer my asked question. it' something technical parameter regarding options trading. which i am not able to figure out.