Participant Wise Open Interest || 15th Jan Analysis of FII DII CLIENT AND PRO Data || Nifty OI, Bank Nifty OI, Change in Nifty OI
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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:
Now let us discuss this numbers in detail.
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Participant Wise Open Interest Analysis based on Today's FII, DII, Client and Pro Data
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).Sections of this analysis:
- Macro and global factors
- Participant wise open interest data
- Clients open interest data
- DII open interest data
- FII open interest data
- PRO open interest data
- Open interest data converted into EXPOSURE TO VOLATILITY
- FII, DII, Clients and PRO Data - Exposure to INDEX VOLATILITY
- FII, DII, Clients and PRO Data - Exposure to STOCK VOLATILITY
1. Macro And 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: India VIX today strengthened to close just above 24.01. What this means in simple terms is that options of index are priced to reflect 24% movement on annualised basis. So the season is on for fast fluctuations most likely in the opposite direction to the current trend.
- Dollar Index: DXY is making another march to the dreaded 91 levels and has been facing resistance above 90.50 for last three days. However, as long as it's holding above 10/20 DEMA, remains in positive territory and with everything that impacts US economy is largely factored into dollar price, upwards seems to be the only direction for Dollar index now.
- Oil: Oil gave up some of the gains registered over last few days, however, any increase in USD rate would mean oil will get dearer for India as Oil bill is paid in USD by India.
- Daily RSI: Nifty had a healthy correction today which brought down RSI to 70. Bank Nifty RSI fell below 70 to close near 68. Today's correction in Nifty accomplish three things created room in Nifty RSI, filled the gap of 8th-9th Jan and tested 10 DEMA. All these, on their own, might explain away today's fall as healthy correction/profit booking with long term trend remaining intact. However, today's open interest data supercedes all these indicators and paints a completely different picture for the market ahead.
- Stimulus: Latest round of 1.9 trillion dollar stimulus has been announced and a tricky component in it is raising minimum wages to 15$ which might not bode well with market. With stimulus already priced in the markets, the "ENTER ON RUMOUR AND EXIT ON NEWS" phenomenon will drive some profit booking for sure.
2. Participant wise open interest data
Previous Day's FII, DII, Client and Pro Data || Open Interest Analysis
Today's Participant Wise Open Interest - Index Charts
Today's Participant Wise Open Interest - Stock Charts
Now let us discuss this numbers in detail.
3. Clients Open Interest Data:
(How Clients participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
- Clients intensified their crazy buying spree having complete faith in continued liquidity flow to Indian equities.
- 132k longs in indices created by clients (loosely Retail Investors) today take their total net long to 232k. The silver lining to this set up, if we must find, is this open interest is purely index options play and nothing on index futures side.
- Relishing past few days story of intrady fall being bought into, retail investors bought 74k index call options and wrote fresh 51k index put options to average taking total short in puts to 168k. On gross levels now clients have more than 1 million short in index put options with no other participant even close to match the number.
- To stress the gravity of this situation further, clients are now "only net longs" (can also read as - "on their own") in index.
- Clients also understand that index doesn't move without support of stocks and hence added 50k fresh long in stocks today - again primarily options play - bought (30k) stock call options and wrote (50k) stock put options.
- This takes their net open interest in stock options to:
- Stock Call Options Long (254k): These are written by FII (35k) and Pro (218k)
- Stock Put Options short (85): These are bought by FII (3k) and Pro (82k)
- With this change in open interest, retail investors are now long 840k in stocks including mammoth 501k long in stock futures.
- Because stock open interest doesn't necessarily net off (long and short could be in different stocks), just another interesting observation is clients gross longs in stocks (1.675 million contracts) is more than gross long in stocks by FII, DII and Pro put together.
4. DII Open Interest Data:
(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
- DII maintained their net shorts in index as well as stocks where they were and they sold 940 Crs in cash market today.
5. FII Open Interest Data:
(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
- FII even though pumped in close to a thousand crores in cash market today, they have wound up all of their long open interest in indices and now stand 30k short.
- Bulls will still focus on FII carrying 43k index futures long and 44k index call options long, the concern being FII is never on the premium paying side unless it matters. Today they are by being net buyers of 118k index put options. Is this only a ploy for FII to cover their longs (and some more!!) or they have already braced for an impact to follow soon?
- By selling 18k stock contracts for the day, FII now carries only 101k net long in stocks. This is nothing compared to 840k long in stocks clients carry.
- Also because stock open interest doesn't necessarily net off, FII's gross long of 682 stock futures might mean they still need some distribution to complete especially because there are no significant gross longs by FII in stock put options to cover for their futures position. Selected stock might still see upside or sideways movement which needs to be used to either exit ones longs or create fresh stocks.
6. PRO Open Interest Data:
(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
- Pro have shorted heavily again today both in indices as well as in stocks.
- Their play is directly in contrast to retail investors as fast as stock and index options are concerned.
- Seeing the open interest data for today, it makes sense as to how Pro preempted impending change in trend over last few days by first collecting premium on call writing and then investing in buying put options. As mentioned earlier, they are supposed to be the first ones to sense any major change in trends which gets conclusively proven yet again.
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)
- Client are now the only participant to lose in case of fall in index and that too heavily.
- DII are hedged smartly and happen to lose just over half in case indices go up and earn double in case indices fall.
- Today's exposure of FII defines the perfect open interest composition one would hope for as they earn the most amongst all participants irrespective of index movement.
- Pro have now covered their short in index put options and hence just want index to close where it is or lower.
9. FII, DII, Clients and PRO - Exposure to Stocks Volatility
(Stocks Open Interest covering Stock Futures, Stock Call Options and Stock Put Options)
- Clients carry enormous amounts of longs both at net and gross levels there cannot be a stronger demonstration to conviction (may be in the wrong direction though). So the more apt analogy is Mad Bull but will be content with labelling them strong bulls.
- FII even though continue to be bullish on stocks, are simply insignificant against the might of clients.
- DII remain largest shorts in stocks which is dismissed as hedge which can soon deliver some profits.
- Pro even though are looking to keep stocks from breaking out, the underlying is their contra position with clients in stock options.
Today if there is one conclusion is to be drawn for the data, it is that the market now have turned to "SELL ON RISE" as against the "BUY ON DIPS" and a perfect example of why open interest data is so critical to study for an early indication of change in trend.
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