Participant Wise Open Interest || Today's Analysis of FII DII CLIENT AND PRO Data || Nifty OI, Bank Nifty OI, Change in Nifty OI

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4th February - Participant Wise Open Interest Analysis based on 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:

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1. Macro and 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 into EXPOSURE TO VOLATILITY
8. FII, DII, Clients and PRO Data - Exposure to INDEX VOLATILITY
9. FII, DII, Clients and PRO Data - Exposure to STOCK VOLATILITY

1. Macro And Global Factors

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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:

• India VIX: Weekly expiry is over but volatility stays. Above 23, it doesn't exactly represent an unmanageable counter play, however, not exactly smooth ride also as you would expect below 18. With market moving in single direction and volatility holding at 23, probably option writers are enjoying their survival of March to June 2020.
• Dollar Index: DXY is continuing it's match upwards with testing 91.50 levels today. The strength is dollar is unable to find support from any major policy decision except for improving macro factors for US. The later however is supposed to be priced in much ahead of time, there for there is a possibility of some news in the making which is increasing risk aversion of global liquidity. The critical level for DXY to breach is 92 above which it has an open field. 
• Oil and Precious Metals: Global economy is improving and Oil is roaring. While silver is still adjusting to industrial application and investment pull, Gold is just sitting there waiting for Dollar to firm up its course. Visible signs of Oil getting ready to cross next important milestone are just too dim against the shine of Indian economy it seems. The situation is optimum for Oil marketing giants which are still to join the "New All Time High" club.
• Daily RSI: Bank Nifty finally climbed mountain 35k and along with it daily RSI reached 74. There is room for upward movement and strength is with it. Nifty RSI has relatively flattened at 65, the negative reading, if one must be pulled off, is that real strength lies between the range of 70-80. Nifty RSI cooling off while Bank Nifty roaring is a divergence in itself. 

2. Participant wise open interest data

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Yesterday'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:

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

• Clients (CONFUSED retail investors) are net long in indices and the operative part of this is 55k net short in index put options. This index put options are primarily bought by FII and today it has much serious implications as discussed in FII section.
• Today interestingly there is no material change whatsoever in stock put options by any of the participants. Stock put options are just out of fashion it seems. 
• While in stocks clients added significant open interest in stock futures gross longs (20k) and shorts (33k). Ultimately 13k reduction in OI means net longs in stock have gone down, however, we had discussed it in the past that stock OI, especially stock futures, does not necessarily net off.
• Also continuing their stock call shopping spree, clients added 14k fresh longs in stock call options taking their total net longs in stock call options to 164k. 

4. DII Open Interest Data:

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

• DII again fell short in their sales (800 Crs) against FII's buying numbers in cash market 
• Indices were untouched by DII and stocks had limited change with 3k shorts covered in stock futures and 1k new short in stock calls resulting in net 2k reduction of shorts in stocks. 

5. FII Open Interest Data:

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

• FII has pumped in another 2,000 Crs in cash segment and also added 8k longs in stock futures, while keeping stock options untouched.
• In indices though, FII has substantially reduced their longs in futures (14k) and also added (9k) index put longs counted by (3k) index call longs. All in all total net shorts added through index options are 6k. Interestingly against this, all major reporting sites are showing a huge 6,700 Crs buying in index put options by FII. 
• NSE's reporting of FII / DII activity in derivatives (in amounts), which most of us are used to seeing as nice charts, has a fundamental flow as far as options are concerned. The amount is calculated by simply multiplying OI with Strike Prices. So even tough their net buying in index options is not that large, the take away is FII have SHIFTED THEIR PUT OI to HIGHER STRIKE PRICES.
• Also their net long in index put options is 99k contracts which are still carried even after the weekly expiry. How to interpret all these is left to your wisdom. 

6. PRO Open Interest Data:

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

• Even after the weekly expiry, Pro chose to carry 41k net short in index call options and 54k net short in index put options. Higher volatility and resultant higher premium prices are just too tempting for them. Interestingly retail investors are also with Pro in index options net open interest (short both sides, though by much smaller quantity in calls).
• Stocks side, while futures are almost untouched, Pro chose to write 12k more call options for retail investors and now their score stand at 140k (written) by Pro vs 164k (bought) by retail.
• Stock put options are untouched today (in terms of change in OI) and the staring contest (40k) continues between Pro (buy) and Clients (sell).
• With this their net short in stocks have now crossed 100k.. 

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

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(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

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

• Clients are eyeing for rally to continue or indices to consolidate by going heavy in selling index put options. This makes them exposed to losses in both sides movement (upside however is very limited exposure). 
• DII's are unchanged in their hedged positions on indices and a third of those are option play with no loss in case of an upside.
• FII are the BIGGEST BENEFICIARIES of upside in indices and large net longs in index put options, at higher strike prices, give them HIGHEST EARNING on lower side also. (Since the tag of Universe Boss is taken, lets use Market Boss)
• Pro are exposed to loss either side and the biggest concern is their quantum of exposure, especially on lower side of indices, is highest ever seen by any participant in a long time. 

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

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

• Retail investors now have upside on 700k contracts which is only increasing with every increase in the market.
• DII are the only bears in stocks simply on account of their huge cash market position, a small portion of which stands hedged as short in stock derivatives.
• FII's while still holding heavy gross longs in stock futures are fairly covered in their exposure on net basis but still continue to be mild bulls only.
• Pro are expecting to keep stocks also from running away either side. Their first choice however would be on the lower side as they have collected a little too much premium on the call options. 

[This is repeated because it might manifest into action VERY VERY SOON]

I am privileged to have readers who are well informed, technically sound and fairly active in the market. I know it's not a cake walk to tolerate my long blah everyday and especially when you navigated the whole article and reached here, it gives that you are an avid (tolerant) reader. However, market needs one more ingredient for a perfect flavor which is reading psychological play also. Therefore it seems pertinent to bring out a psychological aspect which I have observed over last two days with the FITTEST TRADERS (to my belief). These are the most conservative lot - never seen them take any trade without Stop loss and always keen to cut down losing trade first. This lot I believe is the fittest to survive all weathers of the market. These, for last two days, are now saying - "prices are always coming back to our levels, we must not bother with correction that much". This is an eye catching phenomenon for me that how market can manipulate psychology of traders to its advantage. I am not at all failing to recognise the flow of funds, sky rocketing fundamentals and vibrancy of our economy. In fact, I believe Indian economy is at its best and the growth expectation is such that current PE levels will be more than justified by FY22 earnings. No doubt. However, this turn in the psychology of traders is troubling me and is advising me to become most cautious even though we are right in the middle of the best bull run of our life times, this is also in part because of what a wise man said about when to be greedy and when to be cautious. The operative word here is to be CAUTIOUS, not in denial or negative. Keep riding the trend that's what you are here for. However, ensure to adhere to stricter and tighter stop losses for your trades just to honor the psychological play. Not that the market is not kind, but when does it let the euphoria settle and ask us to brace before a nose dive?

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