Nifty Open Interest Analysis

[jamit_05]

Hi OT,

5800 has a huge OI of 91L; the majority believes it to be failsafe.

I have observed that when a SP reaches an extreme level of OI it gets challenged before the expiry. Consider it as an "overbought" level.

The weak hands ought to be shaken out. None should be permitted to make easy money.

OI has leveled to an acceptable size and the weak hands have been shaken off.

Floor (5900) and Ceiling (6100) are well in place. I have shorted strangles in place so this is important for me. If a level is "lost" I will be required to change strategy.

Price is at a strong support, which has been touched/tested 7 times before.
From here on, not expecting much downside. However, have placed my short entries below 5900. Needless to say, upside is on the cards.

 

[jamit_05]

OI in 59p and 61c have increased by a strong number of 10L. They are dependable.

 

[sridhar]

OI in 59p and 61c have increased by a strong number of 10L. They are dependable.

In your experience is there a possibility that either of 5900PE or 6000CE could crack in the last two days?

 

[jamit_05]

In your experience is there a possibility that either of 5900PE or 6000CE could crack in the last two days?

Sure, anything can happen. Some news may come about. So, one ought to have a plan for both outcomes as well.

 

[jamit_05]

In your experience is there a possibility that either of 5900PE or 6000CE could crack in the last two days?

But it is rare for Expiry Week to give breakout. The gain from shorting current month OTM option is also small. So the RR is balanced.

One would like to think that to short a strangle of forward month in the expiry week, and hold till expiry would give risk free money from 4 days of time decay... but I have my doubts. RR always balances; There is no easy money. If you want a buck then you must risk one.

 

[sridhar]

But it is rare for Expiry Week to give breakout. The gain from shorting current month OTM option is also small. So the RR is balanced.

One would like to think that to short a strangle of forward month in the expiry week, and hold till expiry would give risk free money from 4 days of time decay... but I have my doubts. RR always balances; There is no easy money. If you want a buck then you must risk one.

Actually I have a short position (bought 5900PE) & am debating whether to rollover to next month or see what happens till expiry day.

 

[jamit_05]

@sridhar

It is hard to say. We are at a strong support region which has been tested 7 times.

http://www.traderji.com/futures/84708-nifty-futures-positional-trading.html#post812549

If this support break, then your Put will earn really well.

But, I believe, there will not be any strong move on either side. Last month traveled 700 points from the bottom. So it is likely that the price takes time to cool down.

 

[TraderRavi]

First question:

When you shorted 5900 PE, what did you aim to accomplish? Did you want to capture the Up-Move (which you were anticipating) or any other reason?

he has bot puts not shorted...........

 

[Option.Trader]

But it is rare for Expiry Week to give breakout. The gain from shorting current month OTM option is also small. So the RR is balanced.

One would like to think that to short a strangle of forward month in the expiry week, and hold till expiry would give risk free money from 4 days of time decay... but I have my doubts. RR always balances; There is no easy money. If you want a buck then you must risk one.

Yep, agree with you on the options data... looks like the positions are well built to play out a range in the expiry week..a few things could change momentum
- Rupee loosing against dollar, no incentive for FII's to hold on to loosing position
- FII's usually sell derivatives first and then finally equity, net sell figure on friday's trade
- earnings has been poor

Positive
- RBI giving a surprize and giving a 50bps cut... nifty then likely to test 6350
- Govt comes up with some positive surprise to lift momentum

 

[prabhucd]

Re: Cost of carry Analysis

would like to understand cost of carry and its relation with price movement