First of all When I take the OI/COI I always take the values as a SELL and Not as a BUY. So this the first assumption. Because I assume Options are secondary instruments and used by BEARS or BULLs for Hedging their positions.
So let us Take BULLs. If BULLs want to Take the Market UP, then they would be selling Puts. And the BEARS if they want to take the market Down, they would be SELLing Calls. I am not taking option where BULLs could Buy Calls and BEARS could Buy Puts.
So with the Above assumption, today NIFTY is trading near 7600.
So BULLs if they want to Take the market UP, they would be SELLing 7600, 7500, 7400,... PUTs
BEARS if they want to take the market DOWN would be selling 7600, 7700, 7800,.... Calls.
Today as per the COI, The Puts are 27.25 L and Calls are 1.84L. So the Puts is more than Calls and so it is Bullish.
Now we can go Step further and Look at Calls and Puts above and below 7600.
Positive Call Positions below 7600 indicates - Long Build - Bullish
Negative Call Positions (square OFF) below 7600 indicates - Long Unwind - Bearish
Positive Call Positions Above 7600 indicates - Short Build - Bearish
Negative Call Positions (square OFF) Above 7600 indicates - Short Unwind - Bullish
Positive Put Positions below 7600 indicates - Long Build UP - Bullish
Negative Put Positions (square OFF) below 7600 indicates - Long Unwind - Bearish
Positive Put Positions Above 7600 indicates - Short Build - Bearish
Negative Put Positions (square OFF) below 7600 indicates - Short Unwind - Bullish
IF NIFTY is at 7600, normally I consider three strikes above and 3 strikes below. So I consider 7300, 7400, 7500, 7600, 7700, 7800, 7900.
So accordingly.
CALLs below 7600 : -3.5L - Negative - Long Unwind - Bearish
CALLs Above 7600 : 8.8L - Positive - Short Build - Bearish
Puts Below 7600 : 13.5L - Positive - Long Build - Bullish
Puts Above 7600 : 3.3L - Positive - Short Build - Bearish.
So you can see 3 quadrants bearish and 1 quadrant bullish. But the 1 quadrant has more positions than the rest of the three. So ultimately it was positive / bullish or Weak bull today.
If you don't consider those quadrants and take only the Total Calls Vs Total Puts then it is 3.5L Vs 27L. So it is still Bullish.
To cut the Story short, If number of Calls is greater than number of Puts, it is Bearish and Vice versa
So the problem (No clear direction) comes when there is negative value or squaring off happens. Squaring off can mean two things - Profit taking and continue with the trend - Or profit taking and a Reversal.
Yesterday and today is Profit taking in Calls... Yesterday around 30L of Calls squared and today around 10L calls squared off... Now is it a continuation of the Trend or a Reversal - We have to wait and watch.
