NIFTY Options Trading by RAJ

[badarivt]

Volume build ups are because of speculation by the crowd that appears and disappears without sustained interest in the market. Only long term players who hold the options can give a sense of direction, hence OI is more useful

 

[soumanag]

Volume build ups are because of speculation by the crowd that appears and disappears without sustained interest in the market. Only long term players who hold the options can give a sense of direction, hence OI is more useful

Volume data includes both buy & sell so it is very difficult to interpret trend based on volume only IMO.
Raj mentioned in his early posts ways to determine trend strength based on COI + Volume data. I am yet to fully grasp how when VOL>COI gives strength signal.
In OAT however Raj is using COI only for individual strikes to get an overall trend (I think).
Raj would be the best person to clarify kshitijoo8 queries though.

 

[badarivt]

Volume is in lots, OI is in numbers. At that time Raj wrote, 50 NIFTY was 1 lot. Hence, if volume > COI, the traded volume is 50 times the numbers bought / sold for long term. When trading is more than 50 times the quantity held for long term, it may be taken as one of the signals

 

[Somatung]

Here a little add to the subject "Trading with or on Volume":

If you are interested to work with "Volume", here some "Volume Patterns" which may do satisfy some of the question which are in mind of traders. Not directly pointed into the direction of Volume on each option strike level instead to volume on the underlying.

Bulkowski's Volume Pattern resource: http://thepatternsite.com/volpatterns.html

An other way of looking at it is the so called "Volume climax" pattern:

http://www.nirvanasystems.com/oti/education/lessons/volumeclimax.asp

As told: Just an add to the main discussion and have a nice holiday.

 

[ajaygodha]

Hi Raj, i am just reproducing below a para from your initial post because i fail to understand how bulls can hedge their position by selling put as selling put is also like taking bullish position. Please explain

BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions, so that if the market goes in the opposite direction of their Longs they can make money using Options.

 

[badarivt]

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[badarivt]

Hi Raj, i am just reproducing below a para from your initial post because i fail to understand how bulls can hedge their position by selling put as selling put is also like taking bullish position. Please explain

BULLs have LONG Positions in the market. So to protect their LONGs they take the Opposite positions in the Options market by Selling the PUTS (PE) to hedge their positions, so that if the market goes in the opposite direction of their Longs they can make money using Options.

See the post on 18 March, page 692

 

[kshitijoo8]

Volume build ups are because of speculation by the crowd that appears and disappears without sustained interest in the market. Only long term players who hold the options can give a sense of direction, hence OI is more useful

I agree with your point of view, but taking the volumes into consideration, we get the particular days most traded calls/puts & from its COI we can determine, where the market is heading.
As of yesterdays data, we can safely assume that 8800 is going to act as an support &8900 as resistance. So untill any adverse news affects, we may consider market not going below 8800 & heading towards 8850/8900 for earlier part of the day.

 

[ajaygodha]

See the post on 18 March, page 692

Thanks for your reply. But my doubt was about hedging. If the market is to remain in range then bulls will sell OTM calls i.e covered call strategy to hedge their position. correct me if i am wrong.

 

[rahulmalik]

Raj Sir - Reliance update...

The final battle for the day was won by the Bulls .
Now price of underlying @ 904.
However, the max OI still continues to be at 900 CE strike @ 12.7 L (decreased by around 1.5L) with COI @ -91K (increased by around 1.5L). The Max OI still @ 900 CE strike but with -ve change in OI.
How do we interpret this Sir.

w.r.t the OPTSTK data, I see that does not helps at all. Historical evidences support this view for almost every stock. I had a look today at Ashok leyland, reliance, hdil, sbi. all of them have risen since start of april expiry, in nearly the same proportion as nifty. however, their CE/PE ratio is almost the same since it was on 26 / 27 march (april series), even though they had their run throughout these 10 days.