Derivatives - Participant wise OI Data - NSE file in MARKETS - NSE publishes many daily reports under Equity and Derivatives. Under derivatives, one of the important report for those who trade ...
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Participant wise OI Data - NSE file

  1. Participant wise OI Data - NSE file

    NSE publishes many daily reports under Equity and Derivatives. Under derivatives, one of the important report for those who trade in F&O is 'Participant wise OI data".

    All traders are classified into four categories

    1) Client
    2) DII
    3) FII
    4) Pro

    Client - Retail trades and HNI (High Networth Individuals) are covered under this category
    DII - Domestic Institutional Investors (Banks, Insurance companies, Mutual fund houses)
    FII - Foreign Institutional Investors (an investor or investment fund registered in a country outside of the one in which it is investing. Ex: Hedge Funds, Insurance companies, Pension funds, sovereign wealth fund (SWF) etc)
    Pro - Proprietary trading (also "prop trading") occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments

    with the firm's own money, aka the nostro account, contrary to depositors' money, in order to make a profit for itself (Source: Wikipedia)

    Open Interest (Source: Investopedia) - Open interest is the total number of open or outstanding options and/or futures contracts that exist at a given time.

    Open interest is commonly associated with the futures and options markets, where the number of existing contracts changes from day to day. This differs from the stock

    market, where the outstanding shares of a company's stock remain constant once a stock issue is completed.

    If a buyer and seller come together and initiate a new position of one contract, then open interest will increase by once contract. If a buyer and seller both exit a

    one contract position on a trade, then open interest decreases by one contract. If a buyer or seller passes off their current position to a new buyer or seller, then

    open interest remains unchanged.

    Data from NSE: Participant wise OI data

    This contains the open interest of all four participants provided at Index Futures (Long & Short), Stock Futures (Long & Short), Index Call option (Long & Short),

    Index Put option (Long & Short), Stock Call option (Long & Short) and Stock Put option (Long & Short). Total long and short contracts are also provided.

    Most of the time it gets published anywhere between 5PM till 6PM IST on trading day. On expiry day, this gets published late than other days.

    Read somewhere: SEBI has imposed a number of restrictions on the way mutual funds can invest their assets (money). Unlike hedge funds, they are not allowed to short

    stocks or indices. Mutual funds are also not allowed to do speculative activities like trading in the Futures and Options market.

    So DII in options trading will be minimal/none. So for options point of view, DII can be ignored.

    FII and Pro data need to be checked in Index Futures and options to understand how big/powerful traders have traded the day. Please note this, this is data for the

    completed trading day and all the analysis done is for the same. This gives idea on how big players have positioned themselves in market.

    Bullish set up:
    1) Addition of index future longs
    2) Closure of index future shorts (short covering)
    3) Addition of index call longs
    4) Addition of index put shorts
    5) Closure of index call shorts (short covering)
    6) Closure of index put longs

    At times, index future will have addition to both long and short, so one has to check the net quantity (long qty - short qty). If the difference is positive, then one

    can consider trade as bullish. If negative, then bearish set up. Same has to be interpretted with index options as well.

    Bearish set up is opposite of bullish one above.

    This data was more useful for Nifty before weekly bank nifty contracts are introduced. Now that BN has weekly expiry, more of the trading happens in BN options and so

    data in index options category will have to be considered after looking at option chain of Nifty and weekly BN. This data won't be of use on Thursday's due to expiry

    and many positions will be closed. So this data represents index options, mainly for Nifty and BN as these two are the most traded ones.

    General observation: DII will have positional short in stock futures in huge quantity while retail will have positional long in stock futures in huge quantity. Pro will be trading index options actively than other players. FII will always have more index put longs (may be their hedge to other positions). Not much will happen in stock options and for retail traders, it is risky to trade because of low liquidity. High liquid option in stocks is not an issue.

  2. Participant wise OI data can be downloaded from NSE site at Products-->Derivatives-->Equity Derivatives-->Related links (Right side of the page) -->Current Day's Reports-->F&O Dailt Reports.

    Apart from OI data at participant level, one has to look at cash market figures of FII and DII. More selling by FII will put pressure on rupee (as FII will convert rupee into their dollar/their currency to take it back) and it will have negative impact to our markets. This data is available in many websites/mobile apps. One can just search in google for "FII DII Cash figures". In NSE site, it can be found at Home-->Products-->Equities--> Equities-->Current Market Reports-->FII/FPI & DII trading activity on NSE, BSE and MSEI

    Option traders need to track VIX as well. This is again available in NSE site under Products--> Trackers-->India VIX. Higher the VIX, higher the option premiums. Some call this as fear indicator. VIX usually goes down when market moves up and vice versa. VIX also goes up ahead of big events like RBI policy meet, US Fed meet, any election result etc. Once the event is over, VIX drops and so the option premiums. Options premiums are controlled by many factors and volatility is one of them.

  3. Nifty Option Chain Analysis: Home-->Live Market-->Option Chain-->Equity Derivatives-->Options Contracts is the link and default one is Nifty.

    Option writers/sellers sell out of the money options when there is good time to expiry as they get good premium and close their position once premium falls (time decay helps option sellers) as long as the strike chosen is still OTM. Some use short strangle, selling options at strike price of same distance from spot on both call and put. This, traded properly, will generate decent, but consistent returns on a regular basis. Big players use such strategies to earn money.

    Retail players mostly will make loss in future and options. So to increase the probability of being profitable, one has to trade in strikes which is still far away from the ones chosen by big players. Option chain helps to do this. Look for the strike where maximum Open Interest is present. Then pick one or two strike further away from it which can be considered relatively safe to trade. Please note, nothing is safe in market and there is risk always. So one has to keep the risk low in trade. On a steep fall, put OI will reduce. On steep rise, call OI will reduce.

    One can track the change in OI and max OI build up at a particular strike to take trades. For example, apart from index (Nifty/Bank Nifty), TATA MOTORS options are traded actively. One can check the option chain of Jul-2018 contracts. As of now (2-Jul-2018 at 4:20PM), total call OI is about 28Million while put OI is only about 9Million. So many people has shorted call options of tata motors. Unless these short positions are covered, there is less chance of tata motors going up in Jul-18 series though it is trading at multi year lows.

    So option chain gives an indication of overall position of the underlying asset. This is applicable only where there is good liquidity (trading volumes).

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