NIFTY Options trade : Why and what-if...

[adityasaraf007]

This is with reference to the underlying...! For options we look at strike price with the highest OI and see if there is OI addition or subtraction.

The highest OI is in 4500 put (70.30 L) where we saw addition of 1.1 L

4600 put (46.22 L) has seen a reduction in OI by 3.09 L

4800 put (52.16 L) has seen OI reduction of 1.76 L

4800 CALL (35.46 L) saw OI addition of 3.71 L

4900 CALL (46.39 L) saw OI addition of 9.62 L


Conclusion we can draw from here is, bears think 4500 is going to act at support this series while 4900 is the ceiling...! the Heavy addition in OI in calls suggest bearishness....!

Linkon Sir..... from this post of yours, I get a feel that if there is addition in OI, you believe that the addition is because of the Seller..... Is this so???

 

[columbus]

Source:Stocksfortune.com

 

[linkon7]

Yes, 4900CE saw the highest OI gain, but the 5000CE has the highest OI. 4600PE has the highest reduction but 4500put has the highest OI. What does it mean ?

it means the trading range is shifting lower....!

4500-4900 is the new range...! Means, time to short 5000 call and in case we close above 4900, then buy 4900 call and make it a bull spread...!

 

[linkon7]

Linkon Sir..... from this post of yours, I get a feel that if there is addition in OI, you believe that the addition is because of the Seller..... Is this so???

OI increase means increase in positions on a particular contract. When a particular level is secured and smart money believe that level will act as resistance, they start shorting the call and buying the put...! Also those big players who are short on nifty future normally buy calls as a hedge. This accounts for the increase in OI in calls.

since 90% of all options expire worthless, it is generally believed that smart money are option sellers.

As a confirmation we can track the chart of nifty vrs nearest ITM call and ITM put. If we notice that new high on nifty does not correspond to new high on calls, but new lows on nifty corresponds to new high on puts, then we know that calls are being written while puts are being purchased.

 

[DanPickUp]

Also those big players who are short on nifty future normally buy calls as a hedge.

Not necessary as you can hedge in more advanded ways depending on the strategy you follow.

But as you say: Quit the normal way to do so.

Good trading

DanPickUp

 

[TraderRavi]

linkon....today calls decreased by 25 - 30%.. but puts increased by only 10 - 15 %........what this means.......

 

[DanPickUp]

OI increase means increase in positions on a particular contract. When a particular level is secured and smart money believe that level will act as resistance

May I ask:

What is your meaning why this smart money believes that the level is reached?

Any specific declarations on that?

DanPickUp

 

[linkon7]

linkon....today calls decreased by 25 - 30%.. but puts increased by only 10 - 15 %........what this means.......

The pace of fall normally tells us about the sentiments and confidence of the participants about a given strike price being ITM by expiry....!

 

[linkon7]

Not necessary as you can hedge in more advanded ways depending on the strategy you follow.

But as you say: Quit the normal way to do so.

Good trading

DanPickUp

When a particular strike has attracted attention and we cannot have have an increase in contracts unless both buyers and sellers have their reason to enter that strike price. hence OI addition includes people who are buying that contract as well as selling them...!

May I ask:

What is your meaning why this smart money believes that the level is reached?

Any specific declarations on that?

DanPickUp

There is no declaration, just a normal assumption...! when a level is assumed to be secured or has less chance to be ITM, then it is assumed that Smart money are the sellers of that contract....!

 

[DanPickUp]

Hi Linkon7

And thanks for your patient with such questions.

Regarding hedging: It was just a comment and no question. It really depends on the strategy you follow and there are different types of hedging at such levels depending what you did before.

Regarding the smart money levels:

Even smart money has it rules and I do not know them in details.

One way I was told ones is to look at and when this volume come in.

One hint I was given once has been gaps.

Take care and as always: Best success to trading

DanPickUp