Many traders told me that they find it difficult to judge the range of nifty future for short term, so today I am here with an article that will teach you how to find that exact top and bottom range for complete F&O series. First of all you should know what open interest is in Future and Option.
I will explain this with an example:
Trader A sells 1 lot nifty, trader B buys 1 lot nifty – Total open interest at this point is 2 lots.
Trader A buys 1 lot nifty, trader C sells 1 lot nifty – Total open interest at this point is 2 lots.
Trader D buys 1 lot Nifty, trader E sells 1 lot nifty – Total open interest at this point is 4 lots.
After knowing what open interest is, let get back to point
Market Range for Short term:
Upper range: Strike price of the call option having highest open interest out of all call option for that instrument.
Lower range: Strike price of the put option having highest open interest out of all put option for that instrument.
Understand this with an example: Nifty 5400 call option has highest open interest in all nifty call option, so higher range for nifty future in short term is 5400. Nifty 5100 put option has highest open interest when compared with all nifty put options, hence lower range for nifty future in short term is 5100.
Traders must keep in mind this strategy will work when time (in days) of expiry is between 18 to 10 days.
Great information Bhaveek!!
I have a question – can this strategy work out to trade with options?
e.g. – If Nifty is trading at 5000 & the short term range is 5000 – 5600 and I buy Call Option5600 when Nifty is trading @ 5000 to trade @ lowest risk.
Bhaveek Patel says
Hi Anand, If nifty is trading at 5000 then you should buy nifty 5100 call or 5200 call, because they are much near to CMP. If you go with 5600 call there are chances that nifty wont move towards 5600, so even though low risk trade but reward is also negligible. However if 5000 is support the nifty will surely bounce about 50 – 100 points and you can benefit. Did you get the point. 🙂
yes sir 🙂
Sidharth Dhir says
I think the in the money strikes tend to give us higher returns in percentage terms and ensure future liquidity.
i dont understand anything about futur and options and short.can anyone guide me on this
Can u suggest ,how to find this open interest range for nifty index-50 stocks?? with bars..??
ASHOK BHOSLE says
By chance, I stepped upon yr site in Google search and was very impressed to read yr easy to understand explanations about open interest etc.I also read yr other articles.I shall try yr trend finding tool. I hope to have long association with you.
Suhas B. Salunkhe says
Very useful information with unique examples. Thanks for providing in details. Also i have a question that who decide CMP of put & call and how to decide whether operator is in short position?
Nice info Mr. Bhavik.
Hi anand, even buying Nifty 5600 Ce means you are pretty much bullish on nifty that it will cross 5600 level to touch 5700 or 5800, etc & remaining everything as Mr. Bhavik explained accurately.
Why don’t we have a talk some time on the subject of options and what we could do to helps it
be more desirable for everybody.