Follow @mathsofmoney 28th January - Participant Wise Open Interest Analysis based on FII, DII, Client and Pro Data Welcome to the analysis of FII, DII, Client and PRO data of their open interest in Index Derivatives (net open interest...
Follow @mathsofmoney28th January - Participant Wise Open Interest Analysis based on FII, DII, Client and Pro Data
Welcome to the analysis of FII, DII, Client and PRO data of their open interest in Index Derivatives (net open interest and daily changes in Nifty Open Interest and Bank Nifty OI) and Stock Derivatives (net open interest and daily changes in Stock Futures, Stock Call Options and Stock Put Options).Sections of this analysis:
Macro and global factors Participant wise open interest data Clients open interest data DII open interest data FII open interest data PRO open interest data Open interest data converted into EXPOSURE TO VOLATILITY FII, DII, Clients and PRO Data - Exposure to INDEX VOLATILITY FII, DII, Clients and PRO Data - Exposure to STOCK VOLATILITY
1. Macro And Global Factors
Before we proceed with today's open interest data analysis, let us understand few global / macro factors which are more relevant for NSE / BSE these days:
India VIX: Delivering it's promise to the union budget, India VIX held on to the fort 24 today. With monthly expiry out of the way, this kind of volatility means that the momentum drag in indices would be sharp, if this level fails to subside Monday evening then the best choice is to close your laptops and go on a vacation for mental and financial well-being. Dollar Index: Thoroughly disenchanted with improving US economy, DXY still charting the 90-91 range rather less verily. Could the catalyst for Dollar to gain back it's strength be delivered by commodities this time or some corporate perks? This question will be answered in a large proportion when DXY is able to weather the resistance of 91 and hold above it. Oil and Precious Metals: While next OPEC meeting is still more than a month away, the unusual calm in Oil is troubling. There is still no guidance from precious metals as well. The continuous rebound of economy and projections for commodities to beat the best of emerging market equities are failing to manifest in price action, except for Silver which is extremely buoyant for the day. Daily RSI: At 41.50, Nifty daily RSI is just above the critical levels of 40. Any closing below this could simply trigger momentum push by atheist traders (the best category) and Nifty can easily slide down another spiral. 10 and 20 Day EMA are also close to converging which might again be decided tomorrow itself. So all in all tomorrow can decide the fate of Nifty through a lot of widely used technical indicators.
2. Participant wise open interest data
Previous Day's FII, DII, Client and Pro Data || Open Interest Analysis
Today's Participant Wise Open Interest - Index Charts
Today's Participant Wise Open Interest - Stock Charts
Now let us discuss this numbers in detail.
3. Clients Open Interest Data:
(How Clients participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
Clients (UNFORTUNATELY retail investors) booked huge losses in the longs they carried through to the end of January series both in indices (242k) as well as in stocks (111k). Today being the monthly expiry, we shall focus more on what has been carried forward to the next month (for all participants) so that we can formulate a more informed view on market direction in February series which started today.Retailers carried 126k net longs in indices into February which was matched with net short by every other participant. The situation is much more intense as this longs comprise mostly of index put option writing (113k - net) by retail investors - meaning maximum pain and limited gain in case of fall in indices. Just to add to the gravity of this situation retail investors have written a total of half a million index put options on gross levels. Is this the exposure (type and quantum, both) you would want to carry into the Budget day?Clients are also the official put writers (57k) for stocks on day one of February and buyers of stock call options (109k). Both these open interest is in contrast to Pro and FII.Also, interestingly clients continue to dominate gross longs in stocks (1 million), suddenly they are not the largest gross shorters of stocks. This tag now belongs to FII (barring DII, ofcourse) with half a million (522k) gross shorts in stocks.The table seem to have turned fast and sharp against the bull case and as suspected, retail investors couldn't adapt to this change. The result cannot be expected to be less than catastrophic.4. DII Open Interest Data:
(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
DII has a handsome buying (1,700 Crs) in the cash market today. We have seen DII selling in cash market since Nifty crossed 12k also they have been carrying shorts in derivatives segment much before that. With this background, apparently DIIs buying today is less of value pick and more of an equation of fund flow into the AMC may be by switching over from debt or new fund infusion by their investors.5. FII Open Interest Data:
(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
The fact that FII chose to pay premium for 94k net long in index put options, tells us that what budget day holds in store is definitely worth the premium. Also FII chose to roll over most of their longs in stock futures (643k) is giving a completely different picture, especially because with significant price correction over last four days, FII didn't chose to exit these longs, or to hedge them or to add new longs, they simply chose to maintain status quo. So unless there either of these two positions are rolled down, we shall continue to see India VIX rising and markets moving in both directions on intraday basis as well.6. PRO Open Interest Data:
(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
Pro have chosen to enter into February with net shorts in both indices (52k) as well as stocks (68k), however, on gross levels their participation is not that high as we saw over last few days.They have a direct conflict of interest with retail investors in stock put options and stock call options. Also they have a side show type situation with FII in index call options.With significantly high open interest in stock call options short (135k) and stock put options long (90k) are Pro simply geared up to slap down every stock on results or will they again suffer at the hands of retail and FII as they did in early part of January before sweeping back everything they laid out there to retail investors.7. Open Interest Data converted in "Exposure to Volatility"
(Risk exposure for each participant - Client, FII, DII and Pro in case of sharp movement in Index and Stocks in either direction):
Long positions can be created by Buying of Call Options or by Selling of Put Options. Even though both are longs, the risk reward to participant are extremely different. CALL BUYERS take risk equal to premium paid and shall only lose the premium amount in case of downward movement. However they participate and earn fully in case of upwards movement of the underlying asset. On the other hand, PUT SELLERS earn only the premium amount and nothing more in case of upwards movement however they take unlimited risk and loss in case the underlying moves downward.Therefore, it is not sufficient to only analyse NET LONG or NET SHORT positions but also to consider the nature of this position which shall reveal more details like which participants shall look to buy in case of dip (may be to protect their shorts in put options) and which shall look to sell in case of rise (may be the participant with highest short in call options). To account for this, we have mapped each participants open interest data with the nature of open interest and converted it into their EXPOSURE TO VOLATILITY in Index and in Stocks. Here is FII, DII, CLIENTS AND PRO DATA summarizing their EXPOSURE TO VOLATILITY:
8. FII, DII, Clients and PRO - Exposure to Index Volatility
(Nifty Open Interest and Bank Nifty Open interest including Futures, Call Options and Put Options)
Clients start February with being alone and hardest hit in case of fall in Nifty and Bank Nifty where as earning next to nothing in case of rise an unfortunate type of long built up. DII's exposure on both sides have reduced substantially but still pure play bear built up. FII are the BIGGEST BENEFICIARIES irrespective of the direction of index. What more could they ask for? Pro is only interested in collecting call option premiums when they are at their peak with today being first day of the month that too with extremely high VIX.9. FII, DII, Clients and PRO - Exposure to Stocks Volatility
(Stocks Open Interest covering Stock Futures, Stock Call Options and Stock Put Options)
Retail investors are simply refusing to unwind their stock longs. Mid way through the results season and budget just round the corner, such heavy open interest in stocks by single participant is nothing short of COMPLACENCY. FII is continuing with heavy gross longs especially in stock futures into new month as well and have refused to cover these by option counter play. DII are largest bears in stocks simply on account of their huge cash market position, a small portion of which stands hedged as short in stock derivatives. Pro are expecting to keep stocks also from running away either side. Their first choice however would be on the upper side as they have collected a little too much premium already on the put options. Please feel free to leave your comments and follow on Twitter in case you want to know more about Participant Wise Interest Interest Analysis.Follow @mathsofmoney