In NSE daily reports about FII and DII daily transactions, there are several categories mentioned . Two of them are :
a) Option Index Put Long
b) Option Index Put Short
My query is, what does the above mean ?
Does “Option Index Put Long” mean that one is buying Puts, therefore going short (Bearish) ?
Does “Option Index Put Short” mean that one is selling Puts, therefore going long (Bullish) ?
Prima facie your reading of this data is correct, However you should also understand that these institutional traders usually deploy complex options strategies with Multi leg components and hedging involved. It’s like wide as the ocean and it is often difficult to figure out where they are laying their nets.
To get a meaningful picture out of this data, what traders do is, net off all these positions on that report to derive a positive or a negative figure and attributing it to an overall long or short perception.
I have followed these data over a long period of time, and what I could figure out is that it works out in your favor about 30% of the time.
The point is that, these FII institutional traders are not short of funds to change their positions / view with the market sentiment the next day. It’s not as if they are all in on options positioning with a long view on Monday and continue it to the next expiry. If the market sentiment changes on Tuesday, you will see they have changed their hands on Tuesday if the market sentiment changes. While a retail options trader, watching that these FII’s have gone long on Monday , bet all their funds on a Long view on Tuesday while the markets starts moving the opposite way around.
This set of data could be used for reference, but not as a primary decision making indication.
Thank you for the detailed reply
But do I then assume that
Option Index Put Long is BUYING of Puts ? i.e being bearish
Option Index Put Short is SELLING OF Puts ? i,e, being bullish