Participant Wise Open Interest - 6th January - FII DII CLIENT AND PRO - Nifty OI, Bank Nifty OI, Change in Nifty OI

Participant Wise Open Interest Analysis - 6th January

Welcome to the analysis of FII, DII, Client and PRO data of their open interest in Index Derivatives (net open interest and daily changes in Nifty Open Interest and Bank Nifty OI) and Stock Derivatives (net open interest and daily changes in Stock Futures, Stock Call Options and Stock Put Options).

Here are the sections of this analysis:

1. Macro & global factors
2. Participant wise open interest data
3. Clients open interest data
4. DII open interest data
5. FII open interest data
6. PRO open interest data
7. Open interest data converted in "EXPOSURE TO VOLATILITY"
8. FII, DII, Clients and PRO - Exposure to INDEX VOLATILITY
9. FII, DII, Clients and PRO - Exposure to STOCK VOLATILITY

1. Macro & Global Factors

Before we proceed with today's open interest data analysis, let us understand few global / macro factors which are more relevant for NSE / BSE these days:

• India VIX spent most of the day above 21 and closed just a tad lower than 21. Though not the same as 24, but still this offers some respite to bears.
• Oil prices had been consolidating for last few days and are now seeing some upward action - please consider that Oil is India's largest import, Paid for in USD and directly affects inflation numbers.  
• USD is still trying to find its ground and Dollar Index (DXY) is struggling at 89.50 - even though there is no major correction, unless there is a sharp rally liquidity flow shall continue into emerging markets - unhindered. 
• Sharp intraday correction in the second half has pushed Nifty daily RSI to 73, this means Nifty still carries strength and room for upside till RSI reaches 80. On the other hand, Bank Nifty daily RSI also crossed over 70 today and as was evident Bank Nifty looked quite resilient as well. 

2. Participant wise open interest data

Yesterday's Open Interest Analysis - For Comparison

5th January - Dashboard

Today's Participant Wise Open Interest

Following are the key highlights:

3. Clients Open Interest Data:

(How Clients participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)

• Clients are back in the bull run with a bang - Long in index of 130k contracts and Long in stocks of 34k contracts created in a single day. Even though this could be weekly expiry play for index positions, stock positions are definitely for the whole monthly series only.
• This kind of behavior is triggered out of FEAR OF MISSING OUT (FOMO) and manifests into complacent trader like writing of 76k index put options by retail investors for the day. With today's longs added in index, clients are now long in Nifty and Bank Nifty by 130k contracts.
• Same story is seen with clients open interest in Stocks - the ONLY buyers of stock call options and the ONLY sellers of stock put options for the day - sums up retail investors position in stocks. On net levels, now retail investors carry 705k net long in stocks and are the only net buyers of stock call options and only net writers of stock put options.
• In order to understand the gravity of open positions that Clients are carrying against the rest of the participants, here is the representation of Index Contracts reflecting proportion of positions that clients have in the total open interest:

4. DII Open Interest Data:

(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)

• Unlike the usual, DII had a little of action today even though contradictory by going long in index (6k) and going short in stocks (6k).
• While their short in stocks can be explained by closing hedge against sale in cash market, but their long in index is hard to conceive otherwise than profit booking on the dip. However, the quantity is only about 10% of the total short positions DII have in index.

5. FII Open Interest Data:

(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):

• Today, FII have less than halved their long position in index to just 22k net long and as discussed yesterday, all their longs are practically handed over to clients.
• Also, its not just the net longs, but the buying of index put options today (54k) has got FII's entire longs in index futures covered and then some are left to earn in case indices fall. Its worth noting that clients are the biggest writers of index puts and FII are biggest net buyers - speaks a lot especially just a day ahead of weekly expiry.
• There wants much movement in FII's stock contracts for the day, however, with their net long position of 142 contracts, clients are now leading net longs in stock by 5x (705k contracts).

6. PRO Open Interest Data:

(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):

• Pro have almost mirrored clients trades for the day - inversely. 108k new shorts added in index and 26k new shorts added in stocks and addition in shorts of index call options and stock call options clearly indicates that Pro have decided that markets upward movement shall now be arrested.
• Interestingly for stocks, PRO have written 136k stock call options and Clients have bought 154k stock call options. PRO have bought 67k stock put options and clients have sold 68k stock put options. So as far as stocks are concerned, we may expect rotation to continue and market shall keep finding a new puller everyday.

7. Open Interest Data converted in "Exposure to Volatility"

(Risk exposure for each participant - Client, FII, DII and Pro in case of sharp movement in Index and Stocks in either direction):

• Long positions can be created by Buying of Call Options or by Selling of Put Options. Even though both are longs, the risk reward to participant are extremely different.
• CALL BUYERS take risk equal to premium paid and shall only lose the premium amount in case of downward movement. However they participate and earn fully in case of upwards movement of the underlying asset.
• On the other hand, PUT SELLERS earn only the premium amount and nothing more in case of upwards movement however they take unlimited risk and loss in case the underlying moves downward.
• Therefore, it is not sufficient to only analyse NET LONG or NET SHORT positions but also to consider the nature of this position which shall reveal more details like which participants shall look to buy in case of dip (may be to protect their shorts in put options) and which shall look to sell in case of rise (may be the participant with highest short in call options). 
• To account for this, we have mapped each participants open interest data with the nature of open interest and converted it into their EXPOSURE TO VOLATILITY in Index and in Stocks.
• Here is FII, DII, CLIENTS AND PRO DATA summarizing their EXPOSURE TO VOLATILITY :

8. FII, DII, Clients and PRO - Exposure to Index Volatility

(Nifty Open Interest and Bank Nifty Open interest including Futures, Call Options and Put Options)

• FII have taken full advantage of two sided movement in index today and are now fully hedged against any fall in index
• Clients have come back in bull side of play with complacency resulting in higher loss to them in case of fall 
• DII continue their hedge bets - remain strong bears for want of competition
• PRO looking to keep the indices contained at least till this weekly expiry and definitely not to let them slip upwards as they are the biggest losers of any rise in indices

9. FII, DII, Clients and PRO - Exposure to Stocks Volatility

(Stocks Open Interest covering Stock Futures, Stock Call Options and Stock Put Options)

• Clients stand to make the most money in case of across the board rise in stock prices - however we can count on stock rotation to continue
• FII are second in bull race with risk reward almost matching  
• PRO are expecting to keep stocks also within the range

I know with new piece of data added today, you might have few questions, please leave them in comments section and I shall ensure to revert ASAP.