1. Rising open interest in an uptrend is bullish.
Correct
2. Declining open interest in an uptrend is bearish.
Not necessarily, it may also mean just profit booking / short covering by buying back sold contracts which result in declining OI
3. Rising open interest in a downtrend is bearish.
Correct
4. Declining open interest in a downtrend is bullish.
Not necessarily, it may also mean just profit booking / long covering by selling back bought contracts which result in declining OI
5.Whenever there is significant Increase in PE OI and decrease in CE OI , it indicates bullishness , right?
right, but the strike should be at the spot value. If it is below spot means it is becoming support.
6.While checking this OI , should we check only the strike prices which are near the Future price ?
Options are related to Spot and not future prices coz expiry is taken at spot and settlements done at spot prices. Even Future prices are settled at spot prices on expiry day.
7.Also in Business-standard , I read in the Markets section , the editor tells about Supports and Resistances with reference to the increase and decrease in OI , how can it be interepreted ?
Increasing OI in calls at a particular strike means resistance nearabout those levels in Spot
Increasing OI in puts at a particular strike means support nearabout those levels in Spot.
But again, for example - if at 9000 strike, CE OI is 3million and PE OI at 5million then it is obvious that support is much greater than resistance and inverse.
-written by:
MurAtt