Change in Open interests

F&O
1

What Does increase or decrease in open interest indicates also increase in OI means short or long
For eg increase in OI of PUT level what does it means.

2

Increase in Open Interest:

  • Generally indicates: New money entering the market. This suggests growing interest in the underlying asset and potentially strengthens the current trend (upward if prices are rising, downward if falling).
  • Specific interpretations:
    • Uptrend with rising open interest: New positions being opened, likely bullish.
    • Downtrend with rising open interest: Aggressive short-selling, suggesting the downtrend might continue.
    • High overall open interest: Increased liquidity and market attention.

Decrease in Open Interest:

  • Generally indicates: Money flowing out of the market. This can signal weakening momentum or a potential trend reversal.
  • Specific interpretations:
    • Uptrend with falling open interest: Short covering causing the price rise, bearish sign as money leaves.
    • Downtrend with falling open interest: Liquidation of long positions, reinforcing the downtrend.
    • Low overall open interest: Reduced liquidity and potentially less reliable signals.
  • Open interest alone doesn’t provide definitive signals. Consider it alongside price movement, trading volume, and other technical indicators for a more comprehensive picture.
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3

Adding to what @Jayadratha said,

You can read more about OI from this Varsity chapter…

You can learn more about OI from this video by Sensibull

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