Today we thought of putting up an example from an expiry day on “nifty” as so many traders out there are index traders who rely on derivatives data.
Before we move on we want to reiterate that you have to be eagle sharp in listening to all the relevant data point when it comes to index trading because it’s movement is controlled by so many factors.Refer our earlier example Δ OI on index to get more insights.
Now moving on to the Δ OI application to today’s example, any trade that you want to take has to satisfy the criteria set in our post “Δ OI taking a trade” without which a trade doesn’t become successful.
Step 1 : Identify the big money’s positions
This will be a bit easy in index compared to stocks because you don’t need to scan through a lot of history to check these and are visible easily if you just check for 2 days.
For today we identified one such instance in the morning itself with a quantity of 276k just 5 minutes after the open during 9:20-9:30. See image below.
Notice that we are not referring to the opening 10 minutes activity because it is to be taken with a bit of caution as mentioned in our earlier posts.
Step 2: Confirming if this quantity is actually playing out in the market behaviour.
Step 3 : Taking the trade
You could have got the entry around the big money’s buying level anywhere between 11:30-12:30 this is the time when we posted our ITM Put short idea of sell 12200 PE on twitter.
Step 4: Stop loss and profit.
As mentioned earlier this can be 1:1 or 1:2 depending on your risk reward.
This trade today would have needed a good amount of patience but a quite easy one when seen in terms of data and analysis.
Also you might be wondering how come we were so confident of an ITM put 12200 PE instead of ATM 12150 PE.
One reason is that the buying price of is around 12150 which is already acting as support in futures so logically any rally would be towards 12200 and that’s the rationale.
Also see below the opening shorts in 12200 PE which are in line with the futures buying.
So this is how a trade with high probability has been found, we hope this post clears out some of your doubts on how to use this data and the platform.
Share your feedback and comments below.