Open Interest and its impact

[kapil2007]

Will anybody explain "what is huge open intrest Built up on Short Side" means? Wahat is its effect on Stock value in near term...?

 

[sudoku1]

Will anybody explain "what is huge open intrest Built up on Short Side" means? Wahat is its effect on Stock value in near term...?

the positions which r carried forward after mkt close in derivatives r called open interest.
on its effect >as per the theory should b that bears have taken over the counter....but it should als b judged with other tech indicators bcoz bears may also run for cover

 

[abhijitmuley10]

Sir,

Could u plz explain how to recognize short covering in the market ?

 

[stocksplacement]

Please let me know how does one know when long positions are being created or shor coverings, could you let me know the NSE link for the same.
Is live position viewable at NSE Site.

prima facie we construe as following-

future price up & OI up: long positions are being created
future price up & OI down: short covering
future price down & OI up: short positions are being created
future price down & OI down:long liquidation

 

[rajsumi121]

Hi friends .....i do my study only on eod data about oi and volume .

For bulls i find - 1st condition - open interest rise by more than 10% + price of scrip not more then 2% up + volume up by not less than 100% . In this condition 90%chance of next day bull run of that scrip .

2nd condition for bulls = open interest up by not less than 10% + price down by not more than 1% +volume up by not less than 80% . In this condition 80% chance of next day bull run of that scrip .

For bears = open interest up by more than 10% +price of scrip down by more than 3% + volume up by not less then 150% . In this condition 80%chance of next day bear run of scrip again .


This is my personal view and it may be tottly wrong .

 

[narainhere]

In one of the illustration I read

DATE TRANSACTION OPEN INTEREST
OCT 1 A buys 10 options and B sells 10 options contract 10
OCT 2 C buys 20 options and D sells 20 options contract 30
OCT 3 A Sells 10 options and D buys 10 options contract 20
OCT 4 E buys 20 options and C sells 20 options contract 20
On Oct 1, A buys 10 options and B buys them creating an open interest of 10.
On Oct 2, C buys 20 options from D thereby taking the open positions to 30 .
On Oct 3, A squares up his open position and reduces the open interest by 10.
On Oct 4, C also offsets his buy position thereby leaving open interest unchanged.

I am unable to understand why on Day 3 the OI falls by 10, since the 10 options sold by A and 10 options bought by D cancel out so it should remain at 30 only right?

If I am misunderstanding please explain in even simpler terms about OI.

 

[AW10]

OI at any stage reflects total number of open contracts in the system. As buyers and sellers are always equal.. so OI = 30 means, that there are net 30 long positions in the mkt and 30 short positions.

On day 3, when A and D have closed their positions, the net amount of open contracts have reduced. Now there are only 20 longs and 20 shorts in the mkt.. hence OI falls to 20.

happy trading.