Nifty Open Interest Analysis

[trdstudent]

@OT

Can we correctly say that since OI increased and 5900 PE is up, shorts were added. If so, then does 5900 Pe qualify as a base although it has OI > 70 L

@OT ,this is also my question. can u plz elaborate ? Thnx

 

[Option.Trader]

Date: 11.3.2013

As indicated in Sunday post, 5971 was the immediate resistance
Looks like 5900 PE has been capture by bulls on a day of consolidation. No addition of 6000CE indicates that bears are still not sure on upper limit. A close above 5940 (doji) with 3 previous bullish candles is a impending sign of bullishness . 40L shares got added on Put side whereas -1.62 L liquidated on call side also suggesting bulls have made their base at 5900
Also FII's bought close to 2100 crores in Options and looking at the data it looks like they have covered their PE writing done over the past few days making smart profit ... PE premiums have significantly decreased their premiums in last 5 days almost halving each level every day

 

[Option.Trader]

@OT ,this is also my question. can u plz elaborate ? Thnx

Jamit, trdstudent

Its a perspective, i would believe that bulls captured 5900PE firmly by way of moving the OI to greater than 70L. there was no corresponding significant addition in OI on the call side suggesting Put writers had a field day writing at a higher level

 

[Option.Trader]

@OT

Can we correctly say that since OI increased and 5900 PE is up, shorts were added. If so, then does 5900 Pe qualify as a base although it has OI > 70 L

It qualifies as a base .. Bulls have captured 5900... on the puts OI rise, you can correlate with FII data of 2175 crores being added in options... most of them ended up covering their earlier PE writings(profit booking by buying) and made handsome profits

 

[jamit_05]

Jamit, trdstudent

Its a perspective, i would believe that bulls captured 5900PE firmly by way of moving the OI to greater than 70L. there was no corresponding significant addition in OI on the call side suggesting Put writers had a field day writing at a higher level

The confusion is...

There has been increase in the OI BUT... BUT...

with increase in PE price. That is the problem. There has been an interest, sort of a rush, to buy PEs. Since the PE price increased we can conclude that the buying interest was definitely more than selling interest.

So, part of me thinks that this increase in OI was due to shorts being added, puts being bought.

 

[jamit_05]

I think it will be correct to conclude the capture of 5900 by bulls after a day when 5900 PE prices have fallen and at closing its OI is > 70 L ;

 

[prashantjoshi74]

this thread is superb... my concepts are getting cleared day by day and post by post !
thanks Option.trader for starting this thread .
thanks Jamit & others for contribution in this trade !

 

[Option.Trader]

The confusion is...

There has been increase in the OI BUT... BUT...

with increase in PE price. That is the problem. There has been an interest, sort of a rush, to buy PEs. Since the PE price increased we can conclude that the buying interest was definitely more than selling interest.

So, part of me thinks that this increase in OI was due to shorts being added, puts being bought.

Jamit, you can't decide in isolation. That's the reason I put in fii data and total f&o data . What does fii data indicate? 2715 cr of index options bought . The highest oi was in PE. So they have essentially covered their PE writings by buying back the put sold earlier. Remember the people who make money most of the time are writers. Another good thin going for bulls is that pcr ratio is above 1

 

[trdstudent]

The confusion is...

There has been increase in the OI BUT... BUT...

with increase in PE price. That is the problem...... that this increase in OI was due to shorts being added, puts being bought.

exactly jamit , thats also my confusion Anyway hope v will get it clear by 2mrw

 

[trdstudent]

Jamit, trdstudent

Its a perspective, i would believe that bulls captured 5900PE firmly by way of moving the OI to greater than 70L. there was no corresponding significant addition in OI on the call side suggesting Put writers had a field day writing at a higher level

Thnx OT ...but am still not comfortable with that doji on top and the rising PE prices