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How to use Derivative Data to predict Nifty / Bank Nifty Targets

Importance of Participant Wise Open Interest Data

One of the most important aspect of intraday trading or positional trading in Nifty Futures of Nifty Options is to analyse Participant Wise Open Position data. This data reflects how much open interest (net open position) in each of the Derivatives segment of Futures, Call Options and Put options are carried in the market by different types of Participants in the market separately for Stocks as well as for Index (includes #Nifty and #Banknifty both).

Source of Open Interest Data

NSE provides a the end of each trading session. This data is provided by NSE by way of a CSV file which can directly downloaded without need of any registration etc. 

Individual Data Points in Open Interest

Let us understand each component of these Derivatives Data:

Participants: There are four types of Participants included in the data. Client (means retail investors), DII (means Domestic Institutional Investors - MF, PMS, etc), FII (means Foreign Institutional Investors - FPI etc) and Pro (means brokerage firms trade in their own proprietary account).

Open Positions: This is the total positions open under each contract type for each participant at end of the day. 

Index - Futures, Call Option and Put Option: This includes open positions for all future contracts, Call Options and Put Options for allowed strike prices of various expiry dates (weekly & monthly) being traded on the day of reporting for Nifty as well as for Bank Nifty.

Stocks - Futures, Call Option and Put Option: Open positions for all future contracts, Call Options and Put Options for allowed strike prices of various expiry dates (one, two and three months) for all the shares traded under F&O segment.

Analyzing Participant wise Open Interest Derivative Data

The data on its own might not throw a lot of insights as it is just an account of open position carried by each participant for futures, call options and put options for index and stocks separately. However, an ongoing repository of these data can track daily changes in the open interest data which can throw up which direction trades were taken in a particular day which can provide broader direction as to which participant is building / reducing long or short positions using what type of instruments.

Participant wise Open Interest Derivative Data Dashboard

Above is the link of an in-depth dashboard which is updated on daily basis with real derivative data and commentary to describe which direction market is likely to take based on built up in derivative data.

To sum up, participant wise open interest data is the key to unlocking general market direction over short to medium term.