Can you please explain what is considered as a good daily % change in Open Interest for Nifty Index Options/Futures?? As i read in an earlier post, even a 5% change in OI of an option in a day is not treated as considerable positive change to infer a strong sentiment. Please explain why?? And also if possible can you please define some range for inference. eg. 3-10% change in OI in a day is high but suggests a fairly strong sentiment, above 10% is very high and means a very strong sentiment, below 3% is low change and may not be considered much to infer a strong sentiment. Waiting to hear from you.
Tarzan,
My observation is on Nifty futures data for the last 4.5 years (starting 2010) which includes 1,143 data points.
On average, the daily % change in OI is about 2.27%. The correlation between % change in OI versus % change in Nifty is quite low 0.067. This indicates the change in OI, and change is Nifty is quite random. Hence the need to club volume information along with OI.
However, over the last 1,143 days, there were 132 days where the OI change was more than twice the average daily change in OI (5%). Of the 132 days, 74 days resulted in a movement of over 1% (plus or minus) on Nifty, which in my opinion is quite significant.
But, considering 1,143 data points, 132 valid days may not be very encouraging as it is just 11.5% of the sample population.
Also, you maybe interested to know that the average change in OI whenever OI > 5% was validated was 49.25%.
Of course, with some amount of programing, one can fine tune this information to develop deeper insights.
2 Likes