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OPEN Interest , knowledge
| From : Marri Fernandis at 12:29 AM - Sep 16, 2010 ( ) |
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Go to nse india dot com to watch each srcips live and eod oi data .
Pls provide detail. I m deadly in need off. Experts pls spare time for it.
NICE DETAILS THANX. BUT I STILL NEED MORE INFORMATION. AND WHERE DO I GET EACH SCRIPT DATA
S.N.Tripathi ji, Thanks for sharing the information.
OPEN interest is an important factor that investors should observe when
trading in options.
What is open interest?
It refers to the contracts outstanding on a particular day. Suppose the open interest in Satyam September 230 calls is 645 contracts. This means that 645 contracts are due for delivery on expiration of the option on the last Thursday of the month.
Open interest is different from volumes. Suppose you buy one contract of Satyam 230 calls from me, the open interest is one contract, as is the volume in that option.
Now, suppose you immediately sell the 230 calls to another person, the volumes will increase to two contracts. The open interest, however, remains at one! Why?
As you have sold an option that you bought earlier, you are out of the market, while another person has entered for the first time.
So, this new trader is long one contract, while I am still short one contract. Therefore, the open interest is only one contract.
Open interest can be used to read the sentiment in the stock concerned. How?
Observe the open-interest-to-volumes ratio. If this ratio is low but rising, it means that the volumes traded are higher than the open interest. This is an indication that traders are accumulating the option.
In such cases, the rise (change) in open interest over the previous day will be far higher than the rise (change) in volumes.
For instance, open interest may rise from 25 contracts to 100 contracts (300 per cent increase) while volumes may rise from 200 to 400 contracts (100 per cent increase).
Such a signal in a call option may well mean that the stock could move up.
If such a signal occurs in a put option, it may well mean that the stock could move down.
if open interest in the contract rises, but price falls, then it indicates that investors are cautious or bearish. In
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short, investors are creating short positions. Now, in case
open interest in the futures contract falls, but its price moves up, it
indicates a bullish trend. This situation is a result of covering of short
positions. In another scenario where there is a fall in open interest and price
too, analysts read it as a bearish signal, as investors are liquidating their
long positions .
The above example can be used in these scenarios too. In the options segment, a
change in open interest in put or call options enables traders calculate the
put call ratio (PCR) — a popular sentiment indicators of options traders
worldwide, which is the number of puts divided by the number
of calls.
Is open interest the same as trading volumes?
Open interest should not be mistaken for volumes, which is the total number of
contracts that have been traded in a trading session. Higher the number of
trades in a session, more will the volumes swell, unlike open interest, which
drops if a contract is liquidated. Usually, traders use volumes data along with
open interest data and prices to derive a more concrete view on the market.
Why do traders get nervous when open interest is higher-than-average , when
the market is also at record highs?
Many experienced traders perceive an abnormally high open interest in a rising
market as a warning that there could be a reversal in the bullish trend. This
is because several of the weaker traders in the market, who had jumped on to
the bandwagon when the market was rising , could square up positions at the
slightest signs of correction, thereby sparking a self-feeding fall.
open interest is usually used as an indication of the strength of a price movement, but on its own it does not provide any indication of the direction of the price movement.
Increasing open interest shows that there is strength behind the current price movement, and decreasing open interest shows that there is a weakening of the current price movement. For example, increasing open interest along with increasing prices indicates that the upward price movement could continue, but decreasing open interest along with increasing prices indicates that the upward price movement may be about to reverse.
Open interest is also used to determine if a market is likely to be trending or range bound (i.e. choppy). Increasing open interest shows that the rate of new trades is increasing, which indicates that the market is being actively traded. While decreasing open interest shows that the rate of news trades is decreasing, which indicates that the market may be entering a time of less active trading.
COPY PASTE
OPEN INTREST IS THE OUTSTANDING POSITIONS OF FNO TRADE FOR ANY PARTICULAR TRADE IT IS AVAILABLE IN mseindia.com
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