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Moneycontrol.com >> Message Board >> View Messages >> Market Analysis - Technical View
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OPEN INTEREST GAMES AND RULES FROM ALEX!! (87)   17-Oct-07 18:44Tracked by (18)  
Posted by:   radhika_nandlal on ( 17-Oct-07 18:44 )Rating      
A 10 percent change in open interest deserves serious attention, while a 25
percent change often gives major trading messages. The meaning of rising,
falling, or flat open interest depends on whether prices are rallying, falling,
or flat at the time of change in open interest.

1. When open interest rises during a rally, it confirms the uptrend and
gives a signal that it is safe to add to long positions. It shows that more
short sellers are coming into the market. When they bail out, their
short covering is likely to push the rally higher.


2. When open interest rises while prices fall, it shows that bottom-pickers
are active in the market. It is safe to sell short because these bargain
hunters are likely to push prices lower when they throw in the
towel.


3. When open interest rises while prices are in a trading range, it is a
bearish sign. Commercial hedgers are more likely to sell short than
speculators. A sharp increase in open interest while prices are flat
shows that savvy hedgers are probably shorting the market.


4. When open interest falls sharply while prices are in a trading range, it
identifies short covering by major commercial interests and gives a
buy signal. When commercials start covering shorts, they show that
they expect the market to rise.


5. When open interest falls during a rally, it shows that both winners and
losers are getting "cold feet." Longs are taking their profits, and shorts
are covering. Markets discount the future, and a trend that is accepted
by the majority is ready to reverse. If open interest falls during a rally,
sell and get ready to sell short.
6. When open interest falls during a decline, it shows that shorts are covering
and buyers are taking their losses and bailing out. If open interest
falls during a slide, cover shorts and get ready to buy.


7. When open interest goes flat during a rally, it warns that the uptrend is
getting old and the best gains have already been made. This gives you
a signal to tighten stops on long positions and avoid new buying.
When open interest goes flat during a decline, it warns you that the
downtrend is mature and it is best to tighten stops on short positions.
Flat open interest in a trading range does not contribute any new information.
More on Open Interest


The higher the open interest, the more active the market, and the less slippage
you risk while getting in and out of positions. Short-term traders should
focus on the markets with the highest open interest. In the futures markets, it
pays to trade the delivery months with the highest open interest.

You will have to download today and ystday's FNO bhav to compare if prices fell or rose becoz today's bhav will not give you percent change in price it only states the price AS IS!!

Download ystday's bhav first and
filter on all OPTION contracts like optidisk etc and delete them, filter on near month expiry contracts and delete them and only transfer the FUTURES data to a new sheet.

Next download today's bhav filter (like above) and add below ystady's data and SORT on

INSTRUMENT SYMBOL TIMESTAMP in one go with header row selected and ascending selectd for all and study *Change in open interest column* for today 's FNO BHAV

If its positive then open interest has risen, if its negative it has fallen. Check the price if it has fallen from previous day or risen and then select which rule which fits the change in open interest and price.
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