On 18th Aug 2020, there was more 'Open Interest, in a 'Put' side of Nifty for strike rates of 11000, 11100, 11200, 11250 and 11300. Comparatively the 'OI' was much lower in a 'Call' side. I assumed, this is a bearish sign and bought no. of Puts. But market opened by a small bullish trend and all the day was going up and up & Nifty closing with +138 points.(Nifty closed at 11385/-). My question is, why market went bullish and why didn't it go bearish even after so much buying is a 'Put'?
1.2. Robinson|| Link|September 16, 2020 1:05:05 AM
Increasing Open Interest on PUT side signifies that there is a good support. So market can be Bullish when OI in calls are less than Puts atleast around ATM & slightly OTM
I think you made a mistake. If OI is increasing in OTM PE, it's a sign of bullish market. Why ? FII & MF are preferring selling options. They sold & hold OTM PE & created OI. When market turns bullish, PE premium get reduced & they book profit ! Always study all 4 compartments of Option Chain. At least OTM sides.
My question is, why market went bullish and why didn't it go bearish even after so much buying is a 'Put'?