Option Trading in Nifty-50
The approach to effective options trading in Indian stock markets, is to understand underlying price action and this can be understood by the futures price action, coupled with the open interest behaviour.
Open Interest is one of those key data points in futures and options trading on NSE, that holds a lot of analytical information. This data can be used to identify not only the extent of participation but also trend of the underlying adding on to the price behaviour.
As option traders are aware that the price change which is substantiated by effective OI participation tends to be more persistent and more an effective rally, than price action which isn’t supported by OI participation.
In this video Quantsapp built-up tool has been explained. The built-up tool is in essence the study of open interest behaviour, juxtaposed with price action data of the futures.
Discussion of open interest would be incomplete without the mention of the necessary conditions that exist with price action for the Futures OI Built-up tool for NSE traded equity derivatives.
On the bullish end:
Longs = Price Up + OI Up (L)
Long Unwinding = Price Down + OI Down (LU)
On the bearish end:
Shorts = Price Down + OI Up (S)
Short Covering = Price Up + OI Down (SC)
At Quantsapp, it is a firm belief, that option traders in India should harness the power of robust data analytics to transform into data-driven traders, rather than relying on intuition or gut feelings for their trades.
Be a data driven trader!
Prasanna Jadhav is a certified options specialist with a wealth of knowledge and research in technology and financial markets. His knowledge of options trading and insights are very helpful , establishing himself as one of the top expert for acquiring insights into Equity Derivatives Trading.
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