Option trading with open interest data nse

Option trading with open interest data nse

Author: JOKERWEBMASTER Date: 05.07.2017

Futures and options are contracts and similar to any other contract it is a contract between a buyer and a seller. Buyer is bullish expecting the market to go up and seller is bearish expecting it to go down. Only when there is trade between a buyer and seller, a contract opens and all such open contracts are together called as open interest. So if I have bought 1 lot of Nifty expecting it to go up and you have sold 1 lot expecting it to go down, that makes it 1 open contract and hence the open interest of 1.

Typically every derivative contract will have its own OI, Nifty August futures will have its own OI and September futures will have its own. Similarly, OI will be different for calls and puts of various strikes.

OI will go up when more people start participating or existing people start adding positions. According to the OI theory, typically when a market is going in a particular direction and there is a huge addition in OI, this means there is more conviction in the move. So if the market is falling and there is a huge addition in OI, this would mean that the existing short positions which are making profits are adding more and hence the fall could be bigger.

But understand that this is only theory and may or may not work like this in reality. While trading options, the money required to buy options is much lesser than what is required to write sell first. So typically the people who write options are people having access to higher capital and hence the logic is that they are more proficient traders.

I guess it is important to also understand why retail traders typically buy options and institutions sell them? Retail traders are always looking at buying options because technically you have chances of making unlimited profits with investments of small premiums, very similar to how lottery tickets work.

What a retail trader forgets to look at is the fact that the odds of winning are much lower than when you are writing options. Assume that Nifty is at and A buys the call at Rs. Since A is buying Rs. A can make unlimited profits from his Rs , but B can make a maximum of Rs from the Rs invested. But check out the odds and see which side you want to be on. For B to win at Expiry: Nifty stays where it is, Nifty goes below and Nifty goes up but stays below , he can make profits in 3 different scenarios compared to an option buyer who can in only 1 scenario.

As you will see the odds of a writer winning are higher. But also understand that as a writer of options you take unlimited risks and being lax on risk management would mean a severe dent to your trading account. Coming back to the query, when OI for calls is going up, there are new buyers and sellers writers coming in and since the writer is a more proficient trader as explained above, the belief is that he is probably right and better be on his side of the trade which is basically expecting Nifty to not cross So if someone says OI on Nifty calls has gone up significantly, according to the OI logic it means that if Nifty is above it might come below and if it is already below , it might find it tough to go above If I sell 2 lots and there are 2 people X and Y who have bought 1 lot each, assuming we are the only people trading the contract, the OI is 2.

NSE Open Interest

What happens if X who has bought 1 lot sells it to another person Z, what is the OI now? When X sold the lot he had bought from you to Z, a new contract was not created; the existing contract just changed hands so the OI will remain two. But if Z bought say 1 lot from anyone other than X and Y, then that would be a new lot and hence the OI will now go to 3.

Since in the query above a new lot was not created, the OI remains at 2. If the market is going down and OI is increasing market could go even lower because of the OI logic. Assume the OI is presently 10 on Nifty futures and Nifty is at This means there are 10 lots long and 10 lots short.

At , OI went up to 20, basically doubled. When OI went up, either the people who were holding positions from before added or new people came in and bought and sold lots.

If you were looking at all of this, which side would you want to be on, long or short? Understand that at , longs are sitting at 50, loss and are weak and shorts are sitting on 50, profits and are stronger. That is why we infer that if OI went up significantly when market goes in a particular direction, the direction might continue for much longer.

Logic behind assuming that if the OI for calls went up significantly, markets might not cross ? Let me give you an example, assume you are sitting in an exam on financial markets and there are 2 people sitting next to you.

One is Nithin who has almost 15 years of experience in the domain and on the other side is this boy called Siva who is just 2 years into the business and still confused about what the business is all about.

If you had to copy, from whom will you copy, Nithin or Siva? So if you had to bet, be on the same side as the proficient one because the odds of winning go up. So when the OI for calls is going up, there are new buyers and sellers coming in and since sellers are more proficient traders we assume that they are right and hence the market may not go above This is all a theory and may or may not work in real life, but we at Zerodha proprietary trading desk believe it works and are also planning on a tool to help all our traders to track the OI to know what direction the professional traders are in.

According to this theory the underlying Nifty in the above example on the expiry day will gravitate towards that point at which option buyers will feel the maximum pain, basically a point where the maximum number of options, both calls and puts value could become zero worthless on the expiry day. To calculate this we need the open interest of both calls and puts for various strike prices Nifty in this example and use a correct formula to calculate the MaxPain point.

Once you have a formula to calculate MaxPain there are 3 ways in which you can use it for trading, assume Nifty is presently and MaxPain is showing You can setup strategies assuming that Nifty will go towards You can use this for position management, which means that if Nifty is below the MaxPain, take larger buy positions than short positions, because we are generally expecting Nifty to go up. Similarly if Nifty is above the MaxPain, take bigger short positions than long ones as you expect the market to come lower towards the MaxPain.

Keep tracking MaxPain and anytime there is a big move, either up or down, use it as a buy or sell signal respectively. We at Zerodha are looking forward to providing you a tool to track a proprietary strategy of MaxPain for Nifty on our new website. This tool can then be used in any of the 3 ways mentioned above. If the ratio is more than 1, it means that more puts have traded during the day and if it is less than 1 it means more calls traded during the day.

To trade based on PCR; you will first need to collect historic PCR to know the extreme ends it can reach. NSE shares this information on this link daily. Assume that this average range for PCR over the last 1 year is in between 0. Like MaxPain, PCR is also a contrarian strategy which believes that option buyers will typically lose money. So a typical way to analyse PCR would be:. If PCR is below 1, it would mean that more calls are being traded and since more calls are being traded by the retail traders option buyers this could mean that the markets might do the opposite which is go down.

Lower than 1 the PCR is, higher the chances of the market coming down. Since you know that historically PCR has been in the range of 0.

If PCR is above 1, it would mean that more puts are being traded and since more puts are being traded by the retail traders option buyers this could mean that markets might do the opposite which is go up. Higher than 1 the PCR is, higher the chances of the market going up. Since historically PCR is in the range of 0. Love playing poker, basketball, and guitar. Lastly thanks for this write up and hope you will provide many more such articles for mutual benefit we gain and trade more and you get more brokerage.

It is tricky to put a formulae to calculate maxpain as there is none. We have to calculate it based on our own logic. We will share the tool that we internally use at Zerodha and should be up with our new website in the next couple of months.

Hello Sir, is the tool to identify Max pain available in Zerodha website. If yes where this can be find.

I have one doubt Sir. What will be the OI change. The only way to track the OI is from the NSE website and we also provide this detail on the ZT terminal.

What you can track is whether the net OI for an individual contract is going up or down. I have checked on the column options available. If this feature is already available but I am unaware, please advise me. Yes, OI change is currently not available. On our list of things to do. Do read about why it might not be smart to track OI intraday. You can add Open Interest from here. You can view OI directly in F6 or Snap Quote.

PCR is not available for Nifty Options alone.. It is available for Index Options.. You can get it by clicking here. On Expiry day all contract come to end with cash settlement, but end of the day still open interest show it,how? What it mean by? If you are checking for the Aug futures open interest after market closing, it will basically be showing the last OI before closing of the contract. But yes, all OI will become zero after expiry for AUG futures. But if you are looking at general Nifty Future OI, there will be Sep futures and Oct futures which will be open at the end of Aug futures.

Max Pain is a theory and may or may not work the way it is mentioned. Market moves according to itself, but more often than not tends to go towards the point where it can hurt the options buyers the most.

Currently nifty is at It has appreciated by pints in last 3 days. Today data shows nifty index future OI increased by 1. So what I should infer by OI theory? But if a lot of calls are being written, then ideally according to Max pain theory, market will not go up much.

Hi, I just noted that for the option contracts data, zerodha does not have greek variables delta, theta etc. Will we get that data in zerodha? Param, there is a link called option calculator where you can see this. This data will not be available on the marketwatch though. Excellent and very good explanation. As you said Calls OI and Puts OI separation. Can you please suggest where we can get this Calls OI and Puts OI separately in terminal.

IF i take call sell position on expiry date, but i forget to square off if i had taken call sell which is trading 20 rs sum amount will be blocked at the expiry day nifty closed at the time the call sell LTP 23…but i forget to squareoff positions ….

The blocked margin gets released on the same day after closing of the markets. Thank you for a very informative article. Would it be possible to provide a pain calculator using excel? It will be of great help. Please advise when the new site will be launched. All of this will take a while to get implemented, but you can expect to see some results within the next 3 to 6 months.

MaxPain theory is very interesting. Is there any tool thats developed or in process of development to calculate maxpain? Also could you share some points from the back testing results that zerodha conducted on Maxpain?

How relevant is this indicator??

option trading with open interest data nse

Click for futures and SPAN, there is a small section on top of the futures page which explains all your query. IN OPTIONS , FOR INSTANCE NIFTY SPOT IS TRADING , I AM IN THE POSITION OF CE SELL AT 10 RS PREMIUM….. SPOT NIFTY CLOSE AT …AT THE TIME NIFTY PREMIUM IS CLOSED AT 12 RS ….. IF TODAY IS EXPIRY AT THE 3: If nifty closes at on expiry, calls value would be 0 and not 12 in any case. If it is 0, it expires worthless and you get to keep the entire premium that you received when you shorted and the margin is unblocked at end of the day.

Satish, if Nifty closes at exactly, call will call will expire with a 0 value. For call to have any value it needs to close above AND MORE OVER STRIKE PRICE IS ATM 0R ITM FOR INSTANCE NEXT STRIKE PRICE IS Satish, When you buy calls if nifty closes above on expiry it is in the money and hence will have value to it.

Guess you need to figure the basics of options trading, trying reading up on this. SPOT NIFTY IS TRADING IAM IN ITM CONTRACT CALL SELL, PREMIUM IS RS…SPOT NIFTY IS CLOSED AT EXPIRY … THE TIME CALL OPTION CLOSED RS AT EXPIRY…WHAT HAPPEND TO MY BLOCKED AMOUNT…IF I FORGOT TO SQUAREOFF MY POSITIONS, IS EXCHANGE WILL SETTLE, AND GIVE THE REMAINING MONEY? Yes on expiry, your option would automatically get exercised and the margin that is blocked gets released to your trading account.

Yes all options which are ITM or ATM will get exercised and the money is unblocked in your trading account. All OTM options expire worthless and margin automatically gets unblocked on the expiry day. What are the major differences btw Nest starter pack and Nest premium in technical charts? And can i get Nifty live charts with Nest premium if not any other way to get Nifty live charts??? Technical charts remain the same in both starter and premium, presently not possible to get Nifty charts only Nifty future charts possible.

If traded both orders should be fully executed. Been a long time since the interesting products are discussed here… can we have concrete timelines please. Oh btw, excellent article! Nothing gets done without putting a stake in the ground! Hi Nithin, Been a long time since the interesting products are discussed here… can we have concrete timelines please. Sorry about the delay in tools, we suddenly had too much to chew at the same time, it is on our priority, but there are other important things on priority before we work on this.

Suppose im short on call at On expiry, the call value closed at 30 and nifty at At what value the option gets exercised? Difference of strike and close or actual option closing? All options are settled based on the closing price of the underlying, so if Nifty closes at , all exercised calls will be settled at Rs Check the out the Options trading advance module on this link.

And also if possible can you please define some range for inference. Waiting to hear from you. Dear Nithin, You posted this one almost 1yr back and is OI tool and Maxpain calculator available for zerodha clients? And also please provide option calculator…. Check this out, posted your question on tradingQNA. Is the formula available somewhere or do we have to develop it ourselves?

In either case, where can we find this information? If i apply the theory explained in this article, Since the PUT has high OI change than CALL, i guess nifty wont go below Does this indicate that nifty wont reach ? Your logic of has a huge change in OI and also OI itself is highest, yes indicates that is a good support for the series. But you will need to track these closely, as they can keep changing rapidly.

From these numbers can i say that shorters expect Nifty not to go up to as CALL has high number of OI than PUT? Nithin, Some questions reagrding PCR.

The above PCR theory explains wrt PCR of volume? Overall is a good idea. Probably it makes sense to look at the most active contracts. No, it is PCR of the OI. I got it that u have done hell, research and still cn2nw. But can u tell me what if the volume is same as OI,VOLUME IS LOW AS OI. VOLUME IS HIGH THAN OI. You could say that since OI for Calls has gone up significantly, that means that many people are writing the Calls.

The assumption is that smart money writes option, so that could mean that is a resistance for the market. Applying the mentioned logic of highest OI act as support and resistance so what happens if in a stock which has highest OI on a strike of PUT option which is above the underlying , does it imply that it will go worthless during the expiry.

Vivek, yeah by the logic if you see huge OI on an ITM put option, you can assume that the stock is bullish and might go higher to the strike where the OI is more. But that said trading activity on stock options is quite less, so better to be conservative while making such assumptions. I was going through an article on OI, and found undermentioned line, but could not get it, kindly illustrate if possible.

While trading in Nifty options, tracking Nifty futures open interest can give any useful information? No tool as such available right now that I have seen available in India.

We are planning to build something out though. You will be able to see OI on your marketwatch, if you know OI at yesterday close was , and today it is Hello Nitin I am new to zerodha and currently has not explored it much.. Even Z5 doesnt work fine due to java error. I have tried keeping it in exceptions list still out of 10 times 5 times it goes unresponsive. Rest ZT and Pi doesnt work at all on mac. Anyways i wish if they were programmed keeping in view OS as well.

My query is related with max pain.. I have read above that comment was in whereby it was said to be in pipeline.

Since i could explore it much.. Yes Ravi, all the new web based products that we are building will work on MAC seamlessly as well. You can use Pi by installing virtual box on MAC. No tool currently for calculating Maxpain.

Took easy on building that tool, as we all got involved with building Pi. A very insightful article indeed. Totally changed my whole perception of nifty options. Appreciate your help Nithin in this regard. The nifty as I see on 28th September stands with high OI at the PE and PE while high OI at CE and CE. Would you suggest any other indicator that could be combined with PCR and OI data for trade confirmations Nithin? Thank you once again. Nayan, trading volume is very important to track.

If the moves happen with bigger volumes, it will be more convincing. If you are liking what you are reading, you should go through the options module on Varsity: This is a fantastic initiative Nithin by you and your team at Zerodha. Just read through Option Theory and it is a brilliant read. Cant wait to read the series on option strategies. Options have always been the black box for me, but thanks to your team I now know the basics of it. They indeed are a very powerful tool to gauge the breadth of the market.

Any tentative date when the Option Strategies e-learning chapters would go online? Hi Nithin, As you said the smart guys go shorting options in order to eat on premiums. As I look at the OI data, CE, CE and CE have the maximum OI. I understand the CE has good amount of OI since they do not believe the market to touch soon. Hence the CE has been written. However why would they want to write the CE when the nifty is at ? Also at the PUT end, PE and PE have maximum OI.

When the nifty is at , why would they take the risk of shorting an PE and a PE which is so close to the current underlying price?

The closer the strike to current market price, the more money is on the table for option writer. Higher risk, but higher reward also. Check the option theory module on Varsity: Put call ration and OI explained in a very crystal clear manner. Thank You Mr Nithin Kamath. Hii nitin i have some doubt regarding PCR.. I have gone through some sites but they have diff view about PCR. Hai Nithin, Thanks, How to use all this in intraday equty future trading. And how to find which call option to buy or put to write???

I suggest you to read the futures and options module here: Sir, I am new for options and I have basic knowledge about options. I am a ZERODHA customer also……. As per ur article I understand that, is support and is a resistance for nifty for this month expiry. Now, my point is that, what is a strategy for me option buyer. Please explain me, it is only approximate , because I know that any thing can happen in Market at any time. I suggest you go through the various Option Strategies discussed on Varsity: Just I want to know can I understand the OI theory properly or not.

Because, I feel that there was huge support for nifty at and it may rally towards in near term. Or I want to buy a nifty put options at , because, I feel that there was huge resistance for nifty at If you buy Call option, the premium is around Rs which means that Nifty has to cross before the expiry and make profit.

In a nutshell look at the time decay of the premium and the volatility and buy the options accordingly when they are bit cheap. Also the duration you hold the options are also very important. It would be real good if the Max OI can be displayed on the chart similar to other indicators that are there. Last when i spoke to a person from Zerodha, he mentioned that Kite 2. My doubt here is how can derivatives can decide spot price?

Futures and options are derived from spot prices right? Theoretically yeah, but since trading on derivatives is exponentially more than the spot, derivatives end up moving the spot. If I see the put call ratio of a particular stock is day 0.

If it means for every calls there are just 11 puts. And we can look for a short term return from the stock? Let me know if my understanding is correct.

Also hope buying options does increase the cost of the stock? If you are following this logic, you have to feel bearish. Suggest you to read through options module on http: Hari, this has taken a backseat, not on top of the list of things to do. Will probably take some time.

Already 3 years Brother…Also…Open Interest Change is not working properly.. Is it possible to get date wise historical put call ratio of Nifty? I am able to see current day put call ratio on NSE website but could not find the historical data. I had one observation that say for example when the nifty is rising and during intraday there is an huge increase in ITM PE OI. Now this has different behavior on different days: How do we identify these different behaviors and maximize our chances of winning.

Also looking at such conditions it seems that people do buy options but more of ITM options. Please provide your inputs. Hmm… these things are quite tricky, you need to have stored enough data to analyze and come to a conclusion. Btw, suggest you to look at the options module here http: Btw, tracking intraday OI may not be a smart idea, check this why.

In calculating put call ratio, if somebody writes call sell a call , how will that impact the ratio? It depends on if the open interest is going up or down. When you are selling a call, is the person buying from you is a new person or an existing short exiting. If OI decreasing PCR is going up and vice versa. For example, for hindalco march future, on 2nd mar , OI PCR is now. The OI reduced by How can one interpret this? Hi, NIthin, I took the details from Moneycontrol.

Open Interest, MaxPain & Put Call Ratio(PCR) « Z-Connect by Zerodha

Please let me know if there is better site to analyze the OI. I think there was long unwinding here and the undertone remains bullish. What else can we derive from these numbers?

I understand the above logic. What we should do under the above circumstances?

option trading with open interest data nse

Should we buy put option , where OI on calls went up? If so at what strike price we have to buy put option? Can you please give me an example?

No one line answer to this. Suggest you to go through the entire options module on varsity. Open an Account Updates-Latest at Zerodha Pi Beta Updates Why Zerodha? Zerodha Associate Program Zerodha in News — Headlines Zerodha in News — Quotes.

NSE Index Option Open Interest Analysis

August 28, at 9: August 28, at May 6, at 4: May 7, at 1: August 29, at 6: Salil Hemant Sane says: March 24, at 9: March 24, at August 29, at 7: August 29, at 8: August 29, at 4: August 30, at 8: June 1, at 4: August 31, at 4: August 31, at 3: September 3, at 4: September 4, at 3: September 7, at 3: September 8, at 4: September 20, at 9: September 8, at 5: September 9, at 6: September 17, at 9: September 19, at 4: September 20, at 7: September 30, at 1: October 4, at 2: October 7, at 7: November 1, at 8: November 8, at November 7, at November 8, at 7: November 9, at 3: November 22, at 7: November 23, at 2: November 24, at 4: November 24, at 8: November 22, at November 23, at 3: November 26, at 5: November 27, at 8: December 8, at 7: December 9, at December 28, at December 30, at 4: January 27, at 4: February 26, at 9: February 27, at 7: February 27, at February 27, at 6: March 26, at 7: March 26, at April 27, at 2: May 9, at July 25, at July 26, at 4: July 26, at July 26, at 6: July 30, at 1: July 30, at 6: October 4, at 9: October 30, at October 31, at 5: October 31, at 8: October 31, at November 1, at November 1, at 2: December 6, at 2: December 6, at 3: December 25, at 5: January 19, at January 19, at 1: January 19, at 2: April 5, at 4: April 5, at April 19, at 9: April 20, at 9: CA Ravi Khanal says: April 24, at April 25, at 4: April 25, at 5: August 20, at August 28, at 4: August 29, at August 31, at 2: Put To Call Ratio For Individual Stocks Great Stock Market Futures says: September 26, at October 26, at 3: November 3, at December 10, at 8: December 10, at 9: April 5, at 6: April 5, at 9: April 16, at 9: April 16, at April 16, at 2: April 18, at June 15, at 4: May 18, at 8: May 18, at 9: June 15, at 6: July 2, at 7: July 3, at 5: July 15, at 8: July 15, at 9: July 16, at 6: August 27, at 5: August 28, at 8: September 16, at 7: September 16, at 9: October 23, at December 31, at 1: December 8, at 9: January 11, at 4: January 11, at 8: January 20, at 5: January 20, at 6: January 23, at 4: January 23, at 8: February 28, at 8: March 1, at 9: March 2, at March 3, at March 3, at 6: March 3, at 5: April 29, at 1: April 30, at 7: Pankaj K Agarwal says: May 17, at Post a comment Click here to cancel reply.

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