Participant Wise Open Interest || 1st Feb 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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1st 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:
- 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: After holding above 24 for last three trading days, India VIX contracted to 23.30. Usually events like Union Budget takes couple of days to sync with different actors of the market, hence, don't expect for market to be unidirectional. Option prices may move fast to meet their intrinsic value, especially for this weekly expiry, carrying open interest overnight is simply unadvisable.
- Dollar Index: Thoroughly disenchanted with improving US economy, DXY still charting the 90-91 range rather less verily. Could the catalyst for Dollar to gain back it's strength be delivered by commodities this time or some corporate perks? This question will be answered in a large proportion when DXY is able to weather the resistance of 91 and hold above it. Today DXY is holding at 90.90 and again flirting with the immediate resistance of 91.
- Oil and Precious Metals: While next OPEC meeting is still more than a month away, the unusual calm in Oil is troubling. The continuous rebound of economy and projections for commodities to beat the best of emerging market equities are failing to manifest in price action, except for Silver which is extremely buoyant for the day.
- Daily RSI: Unprecedented budget day rally in both indices today has pushed their RSI upwards to very comfortable levels. Bank Nifty especially is showing tremendous strength with RSI at 65 and is promising to cross over 70 soon making another all time high.
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 (PROUDLY retail investors) had the day of their dreams and booked profits in their index call options long and index put options short.
- The troubling fact, however, is in spite of such a sharp rise, clients did not cover gross shorts in index futures, in fact added new shorts in indices to take the short open interest to 115k (vs 107k previous day).
- This quantity is both small and can be easily covered by index option play, therefor let us look at a more eye catching development on index put options. Clients, on gross levels almost doubled their open interest in index put options both sides. They have added almost around 520k longs in index put options (1076k vs 558k) and around 380k shorts in index put options (1054k vs 679k). No other instrument of indices has open interest even close to these numbers even futures and call options combined. As the market direction was one way throughout the day, this simply indicates that clients are holding bear put spreads.
- With almost all the stocks roaring back to their all time highs, Clients, in spite of the perfect opportunity to book some profits in their humongous gross longs in stock futures, decided to hold and even add some more longs to it. Against this, they also refused to cover any of their gross shorts in stock futures and in fact added some more gross shorts in stock futures.
- Even by the most accommodating combination of stock call options short and stock put options buy the 705k gross longs in stock futures cannot be explained away as covered. Clients chose to carry huge quantity of stock futures longs in spite of sharp price movement today simply means that clients are expecting stocks to continue to march forward unhindered.
4. DII Open Interest Data:
(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)
- DII did not bother cash markets much today, however, they covered 8k shorts in stocks.
- Continuous carrying of such large shorts, in spite of a day like today, confirms our view that DII's shorts are simply to hedge their cash market position.
5. FII Open Interest Data:
(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
- The buying frenzy today was definitely not by the FII as evident from their cash market fund flow of 1.4k Crs. So it was the collective might of retail investors that moved the market, I don't want to comment on what this means for the life span of this rally though.
- And with 24k net longs for the day, FII is now only 11k contracts net short in indices, however, they still continue to hold net long of 94k index put options. In spite of retracement of India VIX and a single directional move, FII carrying net long in puts definitely gives mixed signals.
- With 18k net longs added in stocks and especially carried longs in stock futures of 671k contracts is acting as a beacon of hope for clients.
6. PRO Open Interest Data:
(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):
- Pro once again have been decimated by clients. Pro are pushed to book losses by covering 58k shorts in index call options, however, they still carry 19k shorts in index call options to tomorrow which are all bought by FII. Against this they have collected premium by writing 132k index put options for the day which are written by FII.
- They also chose to sell new 23k index futures which again is in contrast to what FII executed for the day.
- In spite of covering 19k shorts in stock contracts, Pro still carry 89k shorts in stocks and the most important component of this is carried open interest of 111k net shorts in stock call options which are bought by Clients and the contrast open interest is seen by both these participants on stock put options front.
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)
- Clients are living the dream so far with booking gains all around index instruments. However, now they need indices to move down else they lose money. Is this the set up which would keep pushing the market up?
- DII's exposure on both sides have reduced substantially but still pure play bear built up.
- FII are the BIGGEST and ONLY BENEFICIARIES in case indices go up and second biggest in case of fall. They just are happy to keep put option premium in play to keep themselves from losing any sleep.
- Pro are only interested in keeping put option premium they have collected today by seeing off atleast weekly expiry without any significant fall in indices. The concern however is how often do Pro get their wish come true.
9. FII, DII, Clients and PRO - Exposure to Stocks Volatility
(Stocks Open Interest covering Stock Futures, Stock Call Options and Stock Put Options)
- Retail investors are simply refusing to unwind their stock longs in fact they keep making their exposure more acute as the time progresses.
- FII is continuing with heavy gross longs especially in stock futures even after the budget as well and have refused to cover these by option counter play.
- DII are largest bears in stocks simply on account of their huge cash market position, a small portion of which stands hedged as short in stock derivatives.
- 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 already on the call options.
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