Follow @mathsofmoney 25th 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 @mathsofmoney25th 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: As we entered the week preceding the Union Budget, understandably, volatility picked up with few expecting FM to deliver on her remarks of best budget in a 100 years while others staying more pragmatic. India VIX above 23 and a truncated week of trading means the movements shall accelerate both sides the bias however may be dictated by open interest data. Dollar Index: DXY is sitting cluelessly at 90.20 and apparently so is the administration. With economic data already showing better than expected recovery, now the battle for quantitative easing is against inflation. Oil and Precious Metals: Oil continues to consolidate holding on to the gains registered in January. Old economy stocks, globally, have long joined the rally and Oil can not be left far behind if that is to sustain. The risk parity is not apparent from precious metals as Gold and Silver also haven't shown any significant price movements. Daily RSI: Nifty RSI fell further along the price action to close just below 54. Today Nifty closed below its 20 day EMA this is for the first time after 28th October and during this period Nifty has clocked 29% gains. Could this be a signal or serious weakness in indices or one more bear trap like 28th October.
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 (aptly retail investors) even after booking losses for 26k contracts, continue to be the biggest bulls of Dalal Street.Even though market provided opportunity during the day with sharp two way movement, clients decided to hold on to their net index put options short of 143k and gross shorts in index put options by them is a little shy of 1 million.Their two front battle in the stock options field stays on:Stock call options bought (238k) from FII (29k) and Pro (206k)Stock put options sold (65k) to FII (3k) and Pro (61k)It is imperative to note that today after a long time Nifty has closed below its 20 day EMA. Today, just like past few weeks, Nifty and Bank Nifty both had sharp recovery from their intrady low in first half but unlike the recent past, market couldn't hold on to the recovery and in fact made new lows in second half and went on to close near these lows.Retail investors probably need to wake up to the fact that laws of gravity do apply to markets as well.4. DII Open Interest Data:
(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
DII sold a small quantity (400 Crs) in cash market however their net short of 9k contracts in stocks (600 Crs) for the day, effectively increases profit booking to almost 1000 Crs for the day.5. FII Open Interest Data:
(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
FII today has failed to book profits even though they were net short and indices moved down. Instead they added new longs in index futures and index call options while continuing to carry 102k net long in index put options. Barring the profits they could have booked during the days trades, this behaviour is suggestive of a possible upmove in index on Wednesday it self. On stocks front FII did book profit (10k) by covering some of their stock call shorts (7k) and by unwinding stock put longs (3k). However this resulted in their net long in stocks increasing by 14k. This again tells the similar story as index. FII's trades today definitely provides some respite to the bulls however it would mean money for them only if they are diligent enough to exit taking the momentary opportunity.6. PRO Open Interest Data:
(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
Once again Pro had the market where they wanted. They did book profits in 27k contracts (22k index put sell minus 7k index futures sell plus 12k index call buy) today.Still they carry 181k net short in index call options and haven't tried to cover it by increasing any meaningful index futures long. This tells us that Pro are convinced that indices must remain in pressure. Also if we look at the option chain today, we have seen open interest in calls shifting downwards rather than new open interest being created at lower strike prices. So Pro are fighting on the front (for keeping the indices down) against Clients. With no major changes in stock open interest, Pro are also the largest net writers of stock call options. Here also the buyers are Clients. Remember clients have decimated Pro in the past especially considering the quantum of gross open interest clients carry.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 are waking up to the possibility of fall in the market (which was not seen for a long time so can't really blame them for losing track of reality) and though insignificant they reduced some longs in indices. Still they are the ONLY losers in case indices fall and also biggest gainers of a rise. DII make twice as much in fall as they lose in rise. A good composition but far from perfect. They remain firm bears for indices and are not looking to cover some shorts and take the gains yet. FII still has envious net open interest making money both sides and that too on significant quantities. Even after a little profit booking for the day, Pro remain stern on keeping the markets down. This, however, doesn't mean we won't see the ups and downs like today.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 means it is advisable for traders not to carry a lot of positions overnight. FII is continuing with heavy gross longs especially in stock futures. Is this an indication of continuing liquidity flow in India or wait for ripe opportunity to hand over these longs just like index longs. 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 simply looking to book some premium by selling stock options both sides. Their stock position keep fluctuating daily and is also too small to matter. 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
