Trade with options data
- Thread starter kiranjakka
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we were facing difficulty only to identify whether the OI accumulation at selective strikes were whether its due to respective strike writing or accumulation
i was searching to over come this problem because we cannot excatly say that this is writing and this is accumulation
later i remembered that my broker gives green colour for the volume that was bought and red colour for the volume that was sold
so i think we can come to conclusion that if there is maximum green colour on the volume side then its accumulation
still needs to be backtested for best results
i was searching to over come this problem because we cannot excatly say that this is writing and this is accumulation
later i remembered that my broker gives green colour for the volume that was bought and red colour for the volume that was sold
so i think we can come to conclusion that if there is maximum green colour on the volume side then its accumulation
still needs to be backtested for best results
Hi
For every option that is written (sold), someone else has to buy it, one New buy+sell new transaction creates open interest.
Now when the old buyer will sell or old seller will buy back (i.e closes the open position) then this decreases the OI.
So effectively there are 4 types of trades wrt OI
Cover = Buy back the old Short option position
Square = Sell back the old Long option position
Now when the OI increases it means that new open position are being created i.e. both Buyers & Sellers camps have increased their respective position size.
The question now is who is forcing the issue? Who is more desperate to initiate the trade? The answer to this perhaps lies in the Implied Volatility.
So the rule can be
Disclaimer: the above maybe correct or maybe its all crap, that's just my current view, been wrong many times before . . .
Thanks
NT
For every option that is written (sold), someone else has to buy it, one New buy+sell new transaction creates open interest.
Now when the old buyer will sell or old seller will buy back (i.e closes the open position) then this decreases the OI.
So effectively there are 4 types of trades wrt OI
- (Long) New Buyer + (Short) New Seller ==> OI increases
- (Long) New Buyer + (Square) Old Buyer ==> OI Same
- (Cover) Old Seller + (Short) New Seller ==> OI Same
- (Cover) Old Seller + (Square) Old Buyer ==> OI Decreases
Cover = Buy back the old Short option position
Square = Sell back the old Long option position
Now when the OI increases it means that new open position are being created i.e. both Buyers & Sellers camps have increased their respective position size.
The question now is who is forcing the issue? Who is more desperate to initiate the trade? The answer to this perhaps lies in the Implied Volatility.
So the rule can be
- OI increases with increase in IV ==> Buyers are forced to pay more and still buying i.e. accumulation.
- OI increases with decrease in IV ==> Sellers are forced to accept less and still selling i.e. writing
- OI decreases with increase in IV ==> Buyers are unwinding at a disadvantage
- OI decreases with decrease in IV ==> Sellers are unwinding at an advantage
Disclaimer: the above maybe correct or maybe its all crap, that's just my current view, been wrong many times before . . .
Thanks
NT
HI ALL
this is just my query?
1. market was positive today not enough though, but why there is so much action in puts and not in call why, are big players writing put or accumulating call
2. In 5300 ITM call we can see OI- below lacs, means traders are not overwhelm about the bullish nature of market instead
3. They are accumulating puts of OTM which is around 122, instead of writing call of 5300 which has less volatility i.e. higher rates.
Its just a assumption as i am also a newcomer, seniors pls guide and rectify me
this is just my query?
1. market was positive today not enough though, but why there is so much action in puts and not in call why, are big players writing put or accumulating call
2. In 5300 ITM call we can see OI- below lacs, means traders are not overwhelm about the bullish nature of market instead
3. They are accumulating puts of OTM which is around 122, instead of writing call of 5300 which has less volatility i.e. higher rates.
Its just a assumption as i am also a newcomer, seniors pls guide and rectify me
hi there,
According to option theory IV is the measure by which we know if an option is cheap or expensive.one look at the option chains data of last few days and we see that IV for calls is less than that for puts.i am still wondering y ?in rising market calls r supposed to be more expensive than puts as chances of outofmoney calls expiring inthemoney is higher in an uptrending market.
Maybe puts r more expensive because there is more demand for it from futures buyers for hedging purpose.And put sellers rnt minding selling becoz they are getting a good price and they are trading with the trend.
Calls are cheaper becoz there is less demand for it.....so call sellers are not getting a great price for it and they are also trading against the trend.So maybe this explains y current series has such huge build up on put side. Also according to option theory option writers prefer to write options where IV is higher.
Coming to the issue of accumulation or writing.....my view is big money or smart money doesnt like to buy options..they always prefer writing options .Its only small time traders who dont have enough money who buy options and also futures players for hedging purpose.its just my humble opinion
.
According to option theory IV is the measure by which we know if an option is cheap or expensive.one look at the option chains data of last few days and we see that IV for calls is less than that for puts.i am still wondering y ?in rising market calls r supposed to be more expensive than puts as chances of outofmoney calls expiring inthemoney is higher in an uptrending market.
Maybe puts r more expensive because there is more demand for it from futures buyers for hedging purpose.And put sellers rnt minding selling becoz they are getting a good price and they are trading with the trend.
Calls are cheaper becoz there is less demand for it.....so call sellers are not getting a great price for it and they are also trading against the trend.So maybe this explains y current series has such huge build up on put side. Also according to option theory option writers prefer to write options where IV is higher.
Coming to the issue of accumulation or writing.....my view is big money or smart money doesnt like to buy options..they always prefer writing options .Its only small time traders who dont have enough money who buy options and also futures players for hedging purpose.its just my humble opinion
.
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