Intraday OpenInterest NIFTY Future

Agilent · #11 30th June 2006, 03:33 PM

Quote:

Originally Posted by aca_trader

So far as I do understand, the OI whenever discussed w/o reference to call/put is for Futures only. On no occassion, I have seen an option being discussed without spcifying the Nature & Expiry Date of the contract.

Please correct me if I am wrong as I don't contribute to their TRP on a regular basis.

Regards,
--Ashish

Ashish
Am not a Futures trader myself (though have done options several times), but tell me ... OI in futures can also be either long or short .... or is it always Long ?

If the former, then why (if at all) are the longs and shorts aggregated to show total OI and what is the meaning of that figure (or of trends in that figure)

AGILENT

aca_trader · #12 30th June 2006, 04:19 PM

Quote:

Originally Posted by Agilent

Ashish
Am not a Futures trader myself (though have done options several times), but tell me ... OI in futures can also be either long or short .... or is it always Long ?

If the former, then why (if at all) are the longs and shorts aggregated to show total OI and what is the meaning of that figure (or of trends in that figure)

AGILENT

OI in futures can never be long or short but it's rather both long or short. OI or Open Interest shows the number of contracts outstanding at a point of time. A contract has always two legs both buy and sell. If a person is selling a futures contract somebody else is buying it at the same time. The number of buy contracts at a time will always be equal to the number of sell contracts. Thus, OI is not long and short aggregated rather it's one of them only.

OI is similar to volume in this respect. For example, if I sell 100 shares and you purchase those 100 shares, the total number of shares traded or volume is 100 and not 200.

Similarly, lets say I enter into a forward contract to sell 100 shares (Futures are nothing but exchange traded forward contracts) with you and both of us don't settle it by the end of the day. So while I am short on 1 contract you are long on one contract as well. However, the no. of outstanding contracts is 1 only and that is what OI stands for. Thus, OI will be 1 and not 2.

Change in OI is to be used in the same way as volume is used. If increase in prices are accompanied by surge in open interest, it means that the speculators are betting on rise in price and the market is attracting new speculators. Thus, the upward move is expected to continue. However, change in prices with marginal no. of outstanding contracts shows lack of interest in activity and the move can be expected to die very soon unless and until supported by renewed activity.

Hope I am able to make sense.

Best Regards,
--Ashish

Agilent · #13 30th June 2006, 07:36 PM

Quote:

Originally Posted by aca_trader

OI in futures can never be long or short but it's rather both long or short. OI or Open Interest shows the number of contracts outstanding at a point of time. A contract has always two legs both buy and sell. If a person is selling a futures contract somebody else is buying it at the same time. The number of buy contracts at a time will always be equal to the number of sell contracts. Thus, OI is not long and short aggregated rather it's one of them only.

OI is the same as volume. For example, if I sell 100 shares and you purchase those 100 shares, the total number of shares traded or volume is 100 and not 200.

--Ashish

Ashish
Well u r not exactly right in contending that Open Intt is synonymous to Volume

[The difference between Volume and Open Interest (notwithstanding the close connection between the two) is analogous to the diifference between a P&L entry and a Balance sheet entry

The former relates to a set of transactions during a period (could be a day to a year), the latter relates to the Outstandings as at a fixed moment in time, usually end of day.... Now surely u know all this ... these are basics ... but I'm mentioning this for the benefit of those few members who may be novices in accounting].

See link that talks of this misconception, and explains with a simple illustration. (I can give a simpler example... if all longs and shorts square off their resp positions by EOD, the Open intt will be NIL , correct... but the volume can be monumental !)

http://www.investopedia.com/terms/o/openinterest.asp

Meanwhile I am trying to figure out the paradox in your post which arises from your implication that in Futures markets, outstanding long positions must equal outstanding shorts ALL the time ..... something doesn't quite gel in this deduction (I know it doesn't hold good for the cash markets , but futures is another thing) ...

Cheers
AGILENT

aca_trader · #14 1st July 2006, 01:32 AM

Quote:

Originally Posted by Agilent

Ashish
Well u r not exactly right in contending that Open Intt is synonymous to Volume

Ofcourse, I was not contending that OI of future is equal to the volume traded. But yes, I failed to illustrate properly. I used that analogy to point out that the OI is not an aggregate of Call & Put OI only and never had a doubt in mind. I have been through that link earlier

. However, thanks to you for illustrating it clearly so that my poor writing does not confuse or misguide anybody.

Quote:

Meanwhile I am trying to figure out the paradox in your post which arises from your implication that in Futures markets, outstanding long positions must equal outstanding shorts ALL the time ..... something doesn't quite gel in this deduction (I know it doesn't hold good for the cash markets , but futures is another thing) ...

Cheers
AGILENT

There is no paradox, it has to be like this only.

Regards,
--Ashish

vince · #15 1st July 2006, 07:36 AM

Hi Agilent,

Sorry to come in late on this discussion but ,Aca 's right. Futures trading is a zero sum game and the longs will always equal the shorts. There has to be a looser for every winner. In other words unlike stock trading futures trading does not actually create wealth but rather just moves it from the looser to the winner.

Open interest has been explained quite well in the preceeding posts and needs no further mention except that I find it only as useful as any other statistic, (that is not very much) since it signifies the market action that has already taken place and is of no way indicative of what is about to happen.

Agilent · #16 1st July 2006, 11:27 AM

Quote:

Originally Posted by vince

Hi Agilent,

Open interest has been explained quite well in the preceeding posts and needs no further mention except that I find it only as useful as any other statistic, (that is not very much) since it signifies the market action that has already taken place and is of no way indicative of what is about to happen.

Vince,
Thanks for your inputs but IMHO there could be more to it than you think.

Look at the links in the attached doc (see next post), which contain rather definitive meanings of possible combinations of OI /Vol stats.

I'm learning myself, and intend to get to the bottom of the differences between interpretation of OI for futures vs OI for Options in the days to come

AGILENT

Agilent · #17 1st July 2006, 11:28 AM

Ooops . here is the attachment

AGILENT

aca_trader · #18 1st July 2006, 07:57 PM

Changed the Sentence. Hope this is not confusing any more.

Regards,
--Ashish

vince · #19 2nd July 2006, 08:27 PM

Quote:

Originally Posted by Agilent

Vince,
Thanks for your inputs but IMHO there could be more to it than you think.

Look at the links in the attached doc (see next post), which contain rather definitive meanings of possible combinations of OI /Vol stats.

I'm learning myself, and intend to get to the bottom of the differences between interpretation of OI for futures vs OI for Options in the days to come

AGILENT

If you do unearth something , do let us know.

Similar Threads for: Intraday OpenInterest NIFTY Future
Thread	Thread Starter	Forum	Replies	Last Post
nifty future trading at huge discount	andy	General Chit Chat	11	2nd December 2007 07:18 PM
Nifty Future trend	miscos	Futures	42	11th June 2007 01:12 PM
Nifty futures intraday data	snowy	Futures	26	5th December 2006 11:00 PM
Jan Future	ranjeet	Stocks & Shares	1	9th January 2005 07:57 AM