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How to Use Options Open Interest Data to Find Trading Range of Nifty Future

By Bhaveek Patel 11 Comments

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.

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Category: Nifty Option Tags: Open Interest/ Options Trading/ Trading Range

About Bhaveek Patel

Bhaveek Patel is one of the most successful traders, technical analyst, and investor, his areas of interest include stock market, forex, and gold trading. Apart from this, he is often seen in the golf course. He is having more than 10 years of experience in trading, had placed his first order on 19 June 2006 with IndiaInfoline.

Comments

  1. anand says

    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.

    Reply
    • 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. 🙂

      Reply
  2. anand says

    yes sir 🙂
    thanks

    Reply
  3. Sidharth Dhir says

    I think the in the money strikes tend to give us higher returns in percentage terms and ensure future liquidity.

    Regards

    Reply
  4. neeraj says

    i dont understand anything about futur and options and short.can anyone guide me on this

    Reply
  5. DD says

    Can u suggest ,how to find this open interest range for nifty index-50 stocks?? with bars..??

    Reply
  6. ASHOK BHOSLE says

    Dear Bhavik,
    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.
    REGARDS,
    ABB

    Reply
  7. Suhas B. Salunkhe says

    Respected Sir,
    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?

    Reply
  8. Gravyin says

    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.

    Reply
  9. BinaryToday says

    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.

    Reply

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