Regarding Option Open Interest

[rajputz]

I know what an Open Interest is. I have seen some people making a commentary on it. Like 9000PE has maximum OI and it should provide a good Support. 9200CE has maximum OI, it should provide a good resistance. And generally, those are the support and resistance points figuratively.

My question is, is it really relevant? For Example, there are 4 to 5 calls available let's say CMP is 900 and then we have

920CE with 1000000 OI
940CE with 2000000 OI
960CE with 900000 OI

880 PE with 800000 OI
860 PE with 1300000 OI
840 PE with 400000OI

It interprets that 940 CE has maximum open positions.

1 meaning is that most people have bought CE and they expect the price to move up.
2 meaning is that most people have sold CE and they are the smart money and prices won't go above this point.

As it can be seen from 1 and 2, it is pretty confusing. What does maximum OI at certain strike means?

Without going into delta and theta or IV how can we know whether the calls are being bought or sold?

Can it be deduced from OI that what strike level is going to be respected by the time of expiry? Below what point is it expected for particular stock to close?

Please note that I am asking from 7 days to expiry point of view.

Thanks in advance for help.

 

[travi]

I know what an Open Interest is. I have seen some people making a commentary on it. Like 9000PE has maximum OI and it should provide a good Support. 9200CE has maximum OI, it should provide a good resistance. And generally, those are the support and resistance points figuratively.

My question is, is it really relevant? For Example, there are 4 to 5 calls available let's say CMP is 900 and then we have

920CE with 1000000 OI
940CE with 2000000 OI
960CE with 900000 OI

880 PE with 800000 OI
860 PE with 1300000 OI
840 PE with 400000OI

It interprets that 940 CE has maximum open positions.

Well, congrats to the OI, Appolo tyres did do a 242 and return within range sparing your position. so OI does work

1 meaning is that most people have bought CE and they expect the price to move up.

2 meaning is that most people have sold CE and they are the smart money and prices won't go above this point.
As it can be seen from 1 and 2, it is pretty confusing. What does maximum OI at certain strike means?

True nature of positions can't have one flavour.
Some maybe pure gamblers doing the buying, the 2nd type that are option strategy sellers trying to gain from decay and have no interest in stock itself others hedging the Futures, some calling the top and I don't know what else.
Some like round numbers....

What Max OI means is that its a level where most Options have been written, or most Sellers and buyers enter at that strike.

Also always remember, ppl have tendency to see higher level as resistance.
But many times in intraday, I look at it as entry point.
This means if price crosses that level, i'll and becomes support.
Many make this happen. That's why in strong trends, that side tends to break a support or resistance and make a new high or new low.

Without going into delta and theta or IV how can we know whether the calls are being bought or sold?

Can it be deduced from OI that what strike level is going to be respected by the time of expiry? Below what point is it expected for particular stock to close?

Please note that I am asking from 7 days to expiry point of view.

Thanks in advance for help.

What can be deduced is for sure, is that there is a very high probability that resistance or support formed at MAX OI will hold.

That is why 7 days to expiry, you need to keep eye on COI (Change in OI) as well.

If COI is increasing, more smart money is willing to put neck on the line and hold that level.
Remember, the option writers are always referred to as smart money bcos of the capital required to write options.
Its not 100% one sided, but more money you have = more brains you have, atleast in the markets :rofl::rofl::rofl:
Only a fool and his money are soon parted

 

[travi]

If COI is decreasing, ppl are running for cover and so should you if you've sold at that level.

 

[rajputz]

Well, congrats to the OI, Appolo tyres did do a 242 and return within range sparing your position. so OI does work


True nature of positions can't have one flavour.
Some maybe pure gamblers doing the buying, the 2nd type that are option strategy sellers trying to gain from decay and have no interest in stock itself others hedging the Futures, some calling the top and I don't know what else.
Some like round numbers....

What Max OI means is that its a level where most Options have been written, or most Sellers and buyers enter at that strike.

Also always remember, ppl have tendency to see higher level as resistance.
But many times in intraday, I look at it as entry point.
This means if price crosses that level, i'll and becomes support.
Many make this happen. That's why in strong trends, that side tends to break a support or resistance and make a new high or new low.

What can be deduced is for sure, is that there is a very high probability that resistance or support formed at MAX OI will hold.

That is why 7 days to expiry, you need to keep eye on COI (Change in OI) as well.

If COI is increasing, more smart money is willing to put neck on the line and hold that level.
Remember, the option writers are always referred to as smart money bcos of the capital required to write options.
Its not 100% one sided, but more money you have = more brains you have, atleast in the markets :rofl::rofl::rofl:
Only a fool and his money are soon parted

And do I have to keep manual tab on OI change everyday or is it provided by NSE. Today I was checking change in OI with zerodha but couldn't find that option.

For the last para, even if the OI is increasing how to deduce whether its being sold or bought. Anyways I think I am getting too much into it for now.

I know the concept of support resistance. I understand what you are stating. I am going to use it somewhere...

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[rajputz]

If COI is decreasing, ppl are running for cover and so should you if you've sold at that level.

Sounds logical.

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[travi]

And do I have to keep manual tab on OI change everyday or is it provided by NSE. Today I was checking change in OI with zerodha but couldn't find that option.

For the last para, even if the OI is increasing how to deduce whether its being sold or bought. Anyways I think I am getting too much into it for now.

I know the concept of support resistance. I understand what you are stating. I am going to use it somewhere...

Sent from my SM-A910F using Tapatalk

OI is not like volume, volume keeps increasing.

If first seller writes 1 lot, and buyers bought it, OI=1.
if that buyer sold it to another buyer, OI=1

Only & only when that original seller will buy back, OI will reduce by 1 unit.

For this u need to use NSE option chain,
so if COI is increasing, it means true Option writers are strengthening that strike.
If COI is decreasing, they're running for cover.

All traders who buy/sell from each other will not affect OI/COI.

 

[rajputz]

OI is not like volume, volume keeps increasing.

If first seller writes 1 lot, and buyers bought it, OI=1.
if that buyer sold it to another buyer, OI=1

Only & only when that original seller will buy back, OI will reduce by 1 unit.

For this u need to use NSE option chain,
so if COI is increasing, it means true Option writers are strengthening that strike.
If COI is decreasing, they're running for cover.

All traders who buy/sell from each other will not affect OI/COI.

What can you deduce from this. I see OI decreasing at all CE and PE. Also whatever positive is fractions compared to decreasing.

 

[mohan.sic]

I know what an Open Interest is. I have seen some people making a commentary on it. Like 9000PE has maximum OI and it should provide a good Support. 9200CE has maximum OI, it should provide a good resistance. And generally, those are the support and resistance points figuratively.

My question is, is it really relevant? For Example, there are 4 to 5 calls available let's say CMP is 900 and then we have

920CE with 1000000 OI
940CE with 2000000 OI
960CE with 900000 OI

880 PE with 800000 OI
860 PE with 1300000 OI
840 PE with 400000OI

It interprets that 940 CE has maximum open positions.

1 meaning is that most people have bought CE and they expect the price to move up.
2 meaning is that most people have sold CE and they are the smart money and prices won't go above this point.

As it can be seen from 1 and 2, it is pretty confusing. What does maximum OI at certain strike means?

Without going into delta and theta or IV how can we know whether the calls are being bought or sold?

Can it be deduced from OI that what strike level is going to be respected by the time of expiry? Below what point is it expected for particular stock to close?

Please note that I am asking from 7 days to expiry point of view.

Thanks in advance for help.

goddam open intrst. Dont break your head over it,especially when it comes to stocks, doing positional analysis is useless.

OI keeps numbers may turn upside down real time in a matter of minutes.
" Effect of Today's OI changes ends with today's market. Tomorrow is new and previous days numbers are of little significance"

Price may not respect max oi strike at expiry level. I have seen many instances where this analogy failed.

When the current market price is at 900 and max ce oi 940.... It does not mean that 940 will act as resistance.

 

[ram2010]

OI is not like volume, volume keeps increasing.

If first seller writes 1 lot, and buyers bought it, OI=1.
if that buyer sold it to another buyer, OI=1

Only & only when that original seller will buy back, OI will reduce by 1 unit.

For this u need to use NSE option chain,
so if COI is increasing, it means true Option writers are strengthening that strike.
If COI is decreasing, they're running for cover.

All traders who buy/sell from each other will not affect OI/COI.

coi is increasing- option writers were strengthening?

i trade options based on coi in real time ,

i watched n number of times-

coi increasing at particular ce and its underlying also increasing parallel- brutally
it means that- hedgers are buying that ce and gamblers were also buying that ce-

you cannot trade based on coi or net oi ,

Its only a supporting factor for a particular trade-

i used options oi as a leading and primary indicator once-

but now iam using it only as a secondary indicator-

 

[rajputz]

coi is increasing- option writers were strengthening?

i trade options based on coi in real time ,

i watched n number of times-

coi increasing at particular ce and its underlying also increasing parallel- brutally
it means that- hedgers are buying that ce and gamblers were also buying that ce-

you cannot trade based on coi or net oi ,

Its only a supporting factor for a particular trade-

i used options oi as a leading and primary indicator once-

but now iam using it only as a secondary indicator-

I am also looking at it as a secondary factor and not primary. Just as a cautious approach and to strengthen the view. I will be having a fail case scenario too.

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