Hello @siva and traders ,
Can you pls help me understand what does change in OI implies for INFY stock? Does it mean Call wrtiting or call buying?
(Snapshot below)
Thanks
Firstly, Open Interest is not only associated with options, but also with futures. OI is the total number of carried-forward open FO(future and/or options) contracts on a given day.
An FO contract is made between a buyer and a seller. With respect to options, one person sells the option and another person buys this option and this together makes one contract.
So OI is the total number of option buyers or option sellers for a particular day, it isn’t both put together.
If the OI increases for a call, it implies that the number of option sellers has increased and equivalently, the number of option buyers has increased.
Ex, if the OI for a call increases by 100, it implies that 100 call optioins were sold, these 100 call options were bought and 100 new call option contracts were added to the existing number of open option contracts.
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It implies Stock to go down. Priority is to be given for options writers as they are taking huge risk.
But in this case there was a news item about buy back after this option writing. So difficult to predict it’s move on Monday. Stock is at 923 and buyback price is at 1150. Normally stock moves towards the buyback price.
There is 37% increase in OI FUTURE. It is strong down trend. Traders who shorted Futures may also buy At the Money Calls.
Check this for better understanding about OI. To summarize OI distinctly does not give any information, it should be combined with volume, direction of change in price , current volatility which should be compared with it’s historical volatility, and with it’s historical average OI.
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