To understand any open interest data the basics has to be stronger by that i mean you should be crystal clear about the meaning of open interest and how it changes, if you are clear about these two things then it’s not difficult to analyze any kind of scenario.
So if you are not sure about the basics yet check our posts on Futures, options OI basics and comeback to read this post because without enough understanding about basics you will find it harder here.
Now assuming that you have made yourself familiar with the basics and you are now fully comfortable on what is oi? and how it changes? we are proceeding to analyze this report called “Participant wise OI” which is released everyday by the exchange website.
You can download the report at this link for any date you wish.
We have downloaded the reports for 23rd December 2019 and 24th December 2019 for the purpose of this post and we will be dealing with reports of these two days in this post.
When you open the report it looks something like this
Here’s the report of 23rd december 2019
Here’s the report of 24th december 2019
By looking at the reports first thing you need to understand that is that this isn’t any complex data but just the same oi data that you learnt about in the basics.
We’ll go step by step here
First thing you need to understand is that all these numbers that you see above in both of the reports are the number of contracts open i.e. open interest at the end of report date.
For example if you take the first number in the report from 23rd December i.e. 129,751 this just means that there are 129,751 contracts open at the close of the market on 23rd December 2019. But which instrument does this number pertain to? that is being told to you by header which is “Index futures” .wait a min, we’ll get to the point on why it’s “index futures long” instead of just the index futures).
Before you understand that part you just need to be reminded of one point from OI basics i.e. for every contract that is created there is both a buyer and a seller and only then a contract is created this essentially translates into below statement
Number of contracts long=Number of contracts short=open interest
Note: I’m using the words long and short instead of buy and sell to indicate the positions are still open.
Now for any derivative instrument(s) this logic will apply, to start with let’s take the first header in the report which is index futures.
Here the Total longs should be equal to be Total shorts per our logic right? You can see that for index futures by doing a sum of column 2 and column 3 or if you trust the report just check the “TOTAL” row. they are equal and 304,200.Similarly you can apply the same logic for other instrument types “index options call”,”index options put”,”stock futures”,”stock options call”,”stock options put”.
Now putting this into our statement
No.of.Longs=No.of.Shorts=Open interest=304,200 this is the number you normally see for any instrument when you see the oi on your terminal or some other source it just tells you how many contracts are open at a point in time. In the current case 304,200 contracts are open in index futures at the close of market on 23rd Dec as this report is as at EOD 23rd Dec.
But did you notice one thing though the totals are equal, category wise numbers differ, why? this is because one category guy can open a contract with a guy in the other category that’s the reason but when you see it at an overall level it’s equal.
If this number is not broken down into categories as can be seen from the report, then you wouldn’t know who is long and who is short as you can just see the total number and should keep guessing who might have been long/short by taking cues from price or some other analysis. But this report gives you that info of who’s long and who’s short isn’t it useful? yeah it is but there are some limitations we will go into that discussion now.
First let’s list out the segments presented here and the individual contracts within those segments
- Index futures – open positions in all futures contracts of all expiries on Nifty, Bank nifty, nifty IT or any other index on which there are derivative contracts active on NSE
- Index options – open positions in all option contracts (CE+PE) of all expiries on Nifty, Bank nifty, nifty IT or any other index on which there are derivative contracts active on NSE.
- Stock futures – open positions of all futures contracts on all stocks of all expiries on more than 200+ stocks.
- Stock options. – open positions of all option contracts(CE+PE) on all stocks of all expiries on more than 200+ stocks
Now you might be wondering where’s the instrument wise data? that is not published out by the exchange which will openly disclose the positions of each of the participant listed above i.e. DII, FII , Pro’s, Clients etc.,
Instead of worrying about what’s not available why not make use of what’s available? With that thought we can use this report to closely watch the positions in index segment which are ultimately driven by stocks, what we are saying here is that if you can use this data to analyze and understand what positions are being taken in index then you can get a sense of overall market sentiment.
See this image where you can check the significance of index derivatives
With that said when looking at this data as mentioned in the above images, your approach should be try and understand the open positions by “Participant” and then by “segment”
For example if you want to know FII’s open position in index futures segment you can get to that number by calculating the difference of longs and shorts in the FII row 111,342-83,170 which gives a net long of 28,172. this would mean FII’s are net long in index futures with 28,172 contracts open as at the close of market on 23rd Dec.
Similarly you can calculate for other segments say index calls the number would be 180,293-58,810 which gives a net long of 121,483. this would mean FII’s are net long in index call options with 121,483 contracts open as at the close of market on 23rd Dec
Now you should be clear and be able to find out the open positions for your combination of Participant(FII,DII,Pro,Clients) and segments (index futures,index call options,index put options,stock segments) by just looking at this report.
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