Retail traders analyze the option chain data daily
They don't record the data to find the correlation
As per standard rules of the option chain analysis - all retail traders are familiar with
Because you are watching the option chain data on nse.com on a live basis
If on-call side open interest increase & price decrease retail traders assume that professional traders are selling the call option and market will move down
If on-put side open interest increase & price decrease retail traders assume that professional traders are selling the put option and market will move up
Ask yourself if you know this rule professional traders also know these rules
Because the stock market is - sum game and 90% of the retail trader lose money in the stock market. Your broker and professional traders earn profit from the retail traders.
Why they allow you to find the direction of the market in advance
If they allow you to how they will make money - who will lose money
First, learn how this industry works- why there is standard rules-when you follow the rule why you lose money
You can also think like this
If on-put side open interest increase & price decrease only 10-20% professional traders are buying the put option and market will move down
If on-call side open interest increase & price decrease only 10-20% professional traders are buying the call option and market will move up
When someone closes their position then either OI should decrease or remain constant depending if the other party is new or existing player. can u pl explain how OI increases when positions are being closed. Thanks in advance.
Lets say smart money want to close the long position on put side in profit. Market is bearish from last two days and falls 200 points due to this Put iv increased which cause the put side premium value higher than normal. If you are in the position of samrt money what wil you do now? You will close your previous long position and creat the fress short position by selling the same put option. But why Smart money will creat the fresh short position? because the mplied volatility is very high option prices are 20-30% higher than normal.but why the retail traders buy the put option because he check the return of previous day and assume that option price will increase 100% or 150% if market fall 100 points more. 20-30% of increase in option price provide an extra edge to the smart money to sell the options and they will hedge the position by index future. whichprovides the 20-30 percent return. If you have any other quesion write us back
Hi. Thanks for sharing this knowledge. I've small query regarding below points "If the option price is lower than VWAP next day closing they have created the short position", "If the option price is upper than the VWAP next they have created the long position" Can you please elaborate on how you concluded these points based on VWAP?
Read this blog https://stockfuturesnse.blogspot.com/2020/05/fii-derivative-data-of-nifty-future.html . Yes the VWAP is important. VWAP tell you the price range . First you need to find the seller of the options or buyer of the options. Find out what FII or Pro or DII are doing.
Sir from where we could find the VWAP of option price? Please guide us regarding the record of option chain data: 1. EOD Data of all weekly expiry for 3 months, Monthly expiry for 3 months 2. intra-day data after certain interval of time throughout the trading session; and for intra day data which expiry should be taken into account?
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You said 'Open interest will also increase when they close their position'.
ReplyDeleteCan you explain this?
When someone closes their position then either OI should decrease or remain constant depending if the other party is new or existing player. can u pl explain how OI increases when positions are being closed. Thanks in advance.
ReplyDeleteLets say smart money want to close the long position on put side in profit. Market is bearish from last two days and falls 200 points due to this Put iv increased which cause the put side premium value higher than normal. If you are in the position of samrt money what wil you do now? You will close your previous long position and creat the fress short position by selling the same put option. But why Smart money will creat the fresh short position? because the mplied volatility is very high option prices are 20-30% higher than normal.but why the retail traders buy the put option because he check the return of previous day and assume that option price will increase 100% or 150% if market fall 100 points more. 20-30% of increase in option price provide an extra edge to the smart money to sell the options and they will hedge the position by index future. whichprovides the 20-30 percent return.
DeleteIf you have any other quesion write us back
Hi. Thanks for sharing this knowledge. I've small query regarding below points "If the option price is lower than VWAP next day closing they have created the short position",
ReplyDelete"If the option price is upper than the VWAP next they have created the long position"
Can you please elaborate on how you concluded these points based on VWAP?
Read this blog https://stockfuturesnse.blogspot.com/2020/05/fii-derivative-data-of-nifty-future.html . Yes the VWAP is important. VWAP tell you the price range . First you need to find the seller of the options or buyer of the options. Find out what FII or Pro or DII are doing.
DeleteSir from where we could find the VWAP of option price? Please guide us regarding the record of option chain data: 1. EOD Data of all weekly expiry for 3 months, Monthly expiry for 3 months 2. intra-day data after certain interval of time throughout the trading session; and for intra day data which expiry should be taken into account?
ReplyDeleteSir from where we could find the VWAP of option price?
ReplyDeleteVWAP IS average price available in option page .
Deletehttps://www1.nseindia.com/live_market/dynaContent/live_watch/get_quote/GetQuoteFO.jsp?underlying=NIFTY&instrument=OPTIDX&strike=10950.00&type=CE&expiry=23JUL2020
Thank you for your valuable comment