very good question, prakash. there is no such rule stating that addition at OI means that only shorts are created
there are two ways of looking at the OI or the change in OI.
if there is a seller/writer there has to be a buyer/premium payer. by judging only the change in OI one can't conclude whether the OI addition favors an anticipation of bullish or bearish view.
but if if you compare the change in OI with the price movement or trend, you could conclude whether the OI change may favor the premium eating vultures or the premium payers.
Basically in very simple terms, Option writers are the Gatekeepers of the price.
Put writers define or gate-keep the price at the support or the max low price level in short term
While Call writer define or gate-keep the price at the resistance or the max high price level in short term
How really short or long is this so called "short term" one can't say. It varies from stock to stock, index to index.
These gatekeepers guard the price and keenly monitor it as well. If it any point of time they feel that their gates are not strong enough to guard or restrict the price below/above their gate-levels, they push open the gates, as a result, the price gets more space to go forward either up or down.
Hope this serves your curiosity.
there are two ways of looking at the OI or the change in OI.
if there is a seller/writer there has to be a buyer/premium payer. by judging only the change in OI one can't conclude whether the OI addition favors an anticipation of bullish or bearish view.
but if if you compare the change in OI with the price movement or trend, you could conclude whether the OI change may favor the premium eating vultures or the premium payers.
Basically in very simple terms, Option writers are the Gatekeepers of the price.
Put writers define or gate-keep the price at the support or the max low price level in short term
While Call writer define or gate-keep the price at the resistance or the max high price level in short term
How really short or long is this so called "short term" one can't say. It varies from stock to stock, index to index.
These gatekeepers guard the price and keenly monitor it as well. If it any point of time they feel that their gates are not strong enough to guard or restrict the price below/above their gate-levels, they push open the gates, as a result, the price gets more space to go forward either up or down.
Hope this serves your curiosity.
