Nifty banknifty Option chain analysis &software -current series-Secret Method

How to interpret Nifty Open Interest Analysis file by Nifty Banknifty Option chain analysis &software

Before we start our analysis it is important to understand / learn the basics of Open Interest. Here are the basics –

Call (CE) – Buy when bullish, Sell/Write when mildly bullish or feel a specific level is resistance

Put (PE) – Buy when bearish, Sell/Write when mildly bearish or feel a specific level is support

Example Example – If your analysis says that 9500 level won’t break on the upper side in next one week, you may write 9500 CE. Similarly if your analysis says that 9400-9200 level wouldn’t break in next one week on the lower side then you may write 9400 PE to eat the premium.

In Options trading, time is like ICE. With time both melts. If volatility increases then premiums go expensive & you may witness both sides wild moves.

Let’s understand the psychology behind this Options buy/selling -

There are 2 types of participants in the market –

1)      Retail (with less capital)

2)      Smart money (Big fund houses -MF, HF, FII, DII etc.)

With less money, retail traders can only buy Options (CE or PE) because Options writing requires full / huge margin just like Futures trading. Whereas on the other hand, Smart money with huge corpus can easily write options. They are better prepared for any wild moves & they know better how to manage their risk.

So in a nutshell, when you see huge OI (open interest) getting added to a specific strike price, it means that retail has bought and Smart money has written. Keep an eye on 2 things –

1)      Which strike price has maximum OI

2)      Which strike price has maximum change in OI (this helps where the action has happened today)

Let me share an example with picture –

	calls	`			PUTS
OI	CHNG IN OI	VOLUME	LTP	STRIKE PRICE	LTP	VOLUME	CHNG IN OI	OI	PCR	PC_CE
-	-	-	-	8,550.00	3.85	742	37	145	#VALUE!	#VALUE!
7	5	8	798.8	8,600.00	5	23,845	289	4,531	647.2857143	4524
-	-	-	-	8,650.00	5.5	1,734	116	299	#VALUE!	#VALUE!
32	1	13	788.15	8,700.00	6.35	44,165	5,049	8,510	265.9375	8478
6	2	3	683	8,750.00	7.5	3,104	438	605	100.8333333	599
126	-16	54	690.95	8,800.00	9	64,579	2,348	8,435	66.94444444	8309
4	4	5	597.7	8,850.00	10.1	5,203	294	572	143	568
211	30	278	593.55	8,900.00	13	78,310	2,089	9,052	42.90047393	8841
22	3	19	549.3	8,950.00	16.5	9,060	284	646	29.36363636	624
1,728	-363	2,734	499.5	9,000.00	19.8	1,85,426	11,213	25,226	14.59837963	23498
96	-24	150	455.5	9,050.00	22.25	16,230	480	1,229	12.80208333	1133
2,060	-87	2,871	402.8	9,100.00	26	1,66,714	3,558	12,067	5.85776699	10007
181	-111	413	372.75	9,150.00	30.1	31,155	662	1,577	8.712707182	1396
2,446	-206	12,813	319.9	9,200.00	39.95	2,25,375	14,740	26,758	10.93949305	24312
297	-66	662	283.6	9,250.00	49	35,456	580	1,783	6.003367003	1486
4,192	-2,200	51,726	245	9,300.00	62	2,57,166	4,738	15,877	3.78745229	11685
450	121	8,910	190	9,350.00	78	77,375	1,713	2,625	5.833333333	2175
9,112	-429	2,50,790	175.9	9,400.00	93.1	2,92,374	8,964	20,354	2.233757682	11242
1,476	265	83,776	145.9	9,450.00	113.7	49,307	2,495	3,425	2.320460705	1949
20,285	6,990	5,10,482	115	9,500.00	136.05	1,35,687	9,817	14,655	0.722455016	-5630
1,486	697	95,442	94	9,550.00	165	4,977	449	450	0.30282638	-1036
14,681	4,491	3,56,541	72	9,600.00	188.1	22,514	1,348	1,905	0.129759553	-12776
1,506	412	56,674	54.45	9,650.00	229.2	480	70	75	0.049800797	-1431
17,591	8,148	2,79,522	42.3	9,700.00	256	3,024	61	366	0.020806094	-17225
1,515	672	45,730	25.3	9,750.00	300	13	6	6	0.003960396	-1509
11,703	4,136	2,25,519	23	9,800.00	344.3	552	116	136	0.011620952	-11567
1,044	781	30,708	16.65	9,850.00	384.15	22	5	5	0.004789272	-1039
6,221	532	1,09,147	11.05	9,900.00	431	76	12	33	0.005304613	-6188
606	434	9,984	9	9,950.00	-	-	-	-	#VALUE!	#VALUE!
14,833	6,809	1,41,308	6.35	10,000.00	523	286	54	479	0.032292861	-14354

In the above picture for 30^th may 2020 EOD data (4^th june expiry) –

95000CE has max OI & 9700CE has max OI change

9400/9200 PE has max OI & 9400/9200 PE has max OI change

Therefore, from count perspective, 9500-9580 will act as major resistance & 9400&9200 will act as a major support for next week.

However, I have added customized this sheet & added couple of more columns (PE-CE) & PCR to understand what is happening at each strike price. This helps the actual picture at each strike.

However, I have added customized this sheet & added couple of more columns (PE-CE) & PCR to understand what is happening at each strike price. This helps the actual picture at each strike.

We all know the PCR concept – If PCR is above 1 then that level is bullish (acts as support) and if PCR is below 1 then that level is bearish (acts as resistance). With this theory if you refer to the below  picture, you get to know that 9450 is immediate  support because PCR is 2.32 (+ve) & 9500 is immediate resistance with PCR as .32 (net PE-CE OI in negative).

		Open Interst				PCR OI			PCR Vol
Security
	Spot price	Call	Change	PUT	Change	Current	Previous	Change	Current	Previous	Change
NIFTY 50	9580.3	345525	61992	495586	121626	1.43	1.32	0.11	0.79	0.98	-0.19
NIFTY BANK	19297.25	97683	35093	136234	55415	1.39	1.29	0.1	0.83	0.92	-0.09

Note:

PE with max OI acts as major support & CE with max OI acts as major resistance. At these levels Smart money has written Options and retail has bought (sold to Smart Money).

Also watch out for -ve OI change in CE & PE. This is called Unwinding. When CE unwinding happens, it means bulls are getting fearful that price may rise up. When PE unwinding happens, it means bears are getting fearful that price will fall.

Hope this helps understand the overall concept cleaner & better. Let me know in case you have any questions.