2023-03-22 08:26:00
OI Terminology & Basics
PE - Short Build up = Traders selling puts, expecting index to be rising and Put premium to be falling, which is bullish / positive indication
CE - Short Build up = Traders selling calls, expecting index to be falling and Call premium to be falling, which is bearish / negative indication
PE - Short Covering - This happens when the traders who have sold put, expecting rise in index and fall in their premium goes wrong, instead index begins to fall and premium on their put begins to rise, where they incur losses, hence gets trapped and leads to short covering rally on Put
CE - Short Covering - This happens when the traders who have sold call, expecting fall in index and fall in their premium goes wrong, instead index begins to rise and premium on their call begins to rise, where they incur losses, hence gets trapped and leads to short covering rally on Call
PE - Long Build up = Traders buying puts, expecting index to be falling and Put premium to be rising, which is bearish / negative (Retail traders / we do this)
CE - Long Build up = Traders buying calls, expecting index to be rising and Call premium to be rising, which is bullish / positive (Retail traders / we do this)
PE - Long Liquidation = Traders who already bought put, expecting index to be falling and Put premium to be rising goes wrong, instead index begins to rise and premium on put begins to fall which hit their SL (Retail traders / we do this)
CE - Long Liquidation = Traders who already bought call, expecting index to be rising and Call premium to be rising goes wrong, instead index begins to fall and premium on call begins to fall which hit their SL (Retail traders / we do this)
The OI data ideally indicates the sentiment and mindset of the traders, as to what they are thinking and are upto.
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