Nifty Option Chain: Live Nifty Open Interest Chart



Nifty LTP OI Support OI Pivot OI Resistance
9108.00 8953.11 9089.04 9224.97

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NIFTY OPEN INTEREST CHART LIVE:

How to interpret “Nifty Open Interest Chart Live | Live Put Call Ratio Tracker”?

In Summary: High PCR means the market is bullish because the option writers are inclined to write puts. Low PCR means bearish sentiment – because option writers are not willing to write puts but instead write calls.

The put-call ratio (PCR) is a popular tool specifically designed to gauge the overall sentiment (mood) of the market. The ratio is calculated by dividing the number of traded put options by the number of traded call options. As this ratio increases, it can be interpreted to mean that the investors are putting their money into put options rather than call options. An increase in traded put options signals that investors are either starting to speculate that the market will move lower, or starting to hedge their portfolios in case of a sell-off.

Why should a trader bother about PCR and Nifty Open Interest?

The put-call ratio (PCR) is primarily used by traders as a contrarian indicator when the values reach relatively extreme levels. This means that many traders will consider a large ratio a sign of a buying opportunity because they believe that the market holds an unjustified bearish sentiment and it will adjust to normal soon, once the short covering begins. Unfortunately, there is no magic number that indicates that the market has created a bottom or a top, but generally traders will anticipate this by looking for spikes in the ratio or for when the ratio reaches levels that are outside of the normal trading range.

An increasing ratio is a clear indication that investors are starting to move toward instruments that gain when prices decline rather than when they rise. Since the number of call options is found in the denominator of the ratio, a reduction in the number of traded calls will result in an increase in the value of the ratio. This is significant because the market is indicating that it is starting to dampen its bullish outlook.

Regarding Nifty Open Interest, it provides good support and resistance levels for the series. Traders usually look for Nifty Open interest highest OI strikes. These strikes are important to determine support and resistance. 

Why Option Writers?

Because Option Writers are generally market players with deeper pockets compared to option buyers.

INTERPRETATION OF OPEN INTEREST CHARTS TO UNDERSTAND MARKET TREND:

Open Interest analysis can provide very useful insights pertaining market trend and support / resistance. It is very important for option traders to understand the relation between open interest and market direction. Combining interpretations from Open Interest (OI) and change in OI can give meaning results. Intelligent traders understand that even though OI is a very crucial ‘market indicator’, it should be combined with other technical indicators to get good results.

OPEN INTEREST TO DETERMINE SUPPORT AND RESISTANCE:

Open Interest data can give very useful clues to determine Support and Resistance.  e.g. if 6000PE has highest open interest, traders perceive it as important support for the current expiry. Keeping in view that most institutional investors write options rather than buy, the data helps to understand mood of ‘intelligent money’. Similarly if huge open interest is build for 6200 calls it will be seen as major resistance zone. If the expiry is near than the market may stay range bound between these two levels.

OI & PRICE CHANGE INTERPRETATION:

PRICE

OPEN INTEREST

INTERPRETATION

Increase in  Price Increase in Open Interest Indication of new money coming and indicates further continuance of uptrend
Increase in Price Decrease in Open Interest Increase in price is due to short covering of positions
Decrease in Price Increase in Open Interest Decrease in price is due to newly build short positions and further weakness is predicted
Decrease in Price Decrease in Open Interest Traders unwinding their long positions by selling existing contracts

While first and third scenarios of interpretation of open interest charts indicate direction of future market trend (Bullish in first case and Bearish in third Case), other scenarios does not indicate a clear trend. Traders can wait for clarity in open interest data or use other indicators to initiate positions.

{ 25 Responses }

  1. In reply to a user’s query:
    The Put Call Ratio (PCR) is based on the live data. It doesn’t consider any previous data.
    The formula to calculate PCR is = (Sum of All Puts)/(Sum of All Calls)

  2. Dear nifty11,
    Observation on Put Call Ratio. Please share your opinion.
    “If the PCR is falling, usually supports get broken easily. If the PCR is rising, resistance are overcome easily”

    • Dear Amit shah,

      It is advisable to not take position based on single indicator.

      I have found OI to be a good indicator but I still don’t rely on it blindly. additionally, money management, choice of instrument play more important role than TA in trading.

      Regarding OI Pivot, I use it to only gauge market strength or weakness. But I wait for retracement before taking any position and also check other indicators.
      consider 5 scenarios:
      1) nifty trading above OI Resistance: strong buying momentum but already over bought for intraday
      2) nifty trading below OI support: strong selling momentum but already over sold for intraday
      3) nifty trading between support and pivot: weak
      4) nifty trading between resistance and pivot: strong
      5) nifty hovering above and below pivot: market waiting for clues. direction not clear

      • Thx sir …..which indicators we can use for nifty trading better result with it?

      • Again, Indicator is one small part of TA. and TA is a one small part of trading. Patience, Money Management, choice of instrument, discipline etc. being others.

        One cannot expect good result with TA alone. However, other things being equal, I suggest you read about the popular indicators and experiment with them.

        People have different biases, hence there is no indicator suitable for everyone or in every situation.

        Based on my experience, if you are looking for catching trend reversals, then look for momentum exhaustion.
        Similarly, if you want to ride a trend, wait for retracement.

    • For some reason, it seems it is calculating the inverse of PCR.

      Hopefully it will be rectified soon.

  3. Hi, Everybody,
    I am new to this field and while understanding the PCR, I have certain queries.
    1. How, High PCR means the market has bullish sentiments…?….because high PCR means investors are putting their money in Puts more, expecting Puts to give them return. And premium of Puts rises only if the market falls. This means the sentiment is bearish and the investors are expecting the market to fall and have bought puts to give them good returns. In contrast, if the market rises, the puts will decrease in value and the investors who have invested in Puts will loose their money. so how come high PCR is bullish. Please someone explain.

    Regards,
    Chintan

    • Hi Chintan,

      Trading is a zero sum game. One party makes money at the expense of other. Same holds true for option buyers and sellers (also known as option writers).

      While both experienced and new traders buy options, the reasons for buying is very different. The experienced traders buy options to hedge their portfolio (and they usually don’t buy naked options – hence little impact on PCR). The new trader (or inexperienced trder) is lured to buy options to make quick money.

      Option writers are usually people with deep pockets (also more experienced), since writing options require higher margin compared to option buying. This is the reason why high PCR is considered bullish.

      Hope I have clarified your doubt. While markets are lot more complicated, I have simplified the dynamics for clearing your doubt.

  4. Hi Pradeep,

    Thanks for your prompt response. But it did not clarify my doubt. Hedging is trying to nullify the losses. Also, writing options require higher margin compared to option buying is correct as unless this is true you do not make a profit. you need to buy at low and sell high. This is what it is. Secondly, in terms of higher PCR, the investors are not writing puts they are buying..!…..this means that they are expecting the market to fall so that the puts they have bought increases in value and make a decent profit…so how come high PCR is bullish….this is my basic question….

    Regards,
    Chintan

    • Beginners react when there is panic or euphoria in the market. Mostly when this happens the news is already priced-in.

      Now as you said, “Secondly, in terms of higher PCR, the investors are not writing puts they are buying..!…..this means that they are expecting the market to fall so that the puts they have bought increases in value and make a decent profit…so how come high PCR is bullish….this is my basic question….”
      – Please understand that if one party is buying options, then someone in the market is selling the same options. Beginners are usually not into writing options. Beginner traders are usually lured by low risk and unlimited return potential of buying options. While the experienced writers understand the time-value decay of options.
      Now, let’s say their is panic in the market and the new trader accumulates puts. The same puts are being written by someone who has been in the market for long time. One party buying puts and the other selling them, so the PCR will go up.
      Some statistics suggest that 90% of options expire worthless which means the experienced traders have made money 90% of the times.

      – In deep fear condition when a smart investor is also buying put options to protect his portfolio value, he will most likely also sell puts on lower strike price. Hence the PCR has little or no impact from this.

      – Casual investors react in the same way. They close their position during extreme panic, while the smart trader start buying at this time. High PCR is bullish because the smart investor write Put options and buy in delivery at the same time. Similarly, they sell call options and sell in delivery at the same time. While casual or uninformed investors does just opposite.

      Hope this helped.

  5. Hi, came to know about your site through google. amazing work.
    One query, i belive while calculating PCR, you have cosidered only current series OI, isn’t it?
    If yes, then is there any option to take data from all the open series. That would give a much clearer picture.

    • Thanks for the feedback. Please feel free to reach out if you have further ideas/suggestions.
      Currently the PCR is being calculated using the current series data only. Since the OI for other series is so small, it will have very little impact on the PCR value. However, we will explore the possibility of providing that info in some other way to improve it’s usability.

  6. Valuable information. Fortunate me I discovered your site accidentally,
    and I am stunned why this accident did not came
    about earlier! I bookmarked it.

  7. good information provided by owner of site, but scare how should it use ?

  8. Hi,
    I had a request to enhance the content of this site.
    Can we have OI of NIFTY futures on time basis for intraday? Like for every 5/15 Minute interval the change of NIFTY futures OI should be reflected .This will be very much useful for intraday users.
    I appreciate your efforts providing the content for free of cost

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