How to Use Options Open Interest Data to Find Trading Range of Nifty Future

How to Use Options Open Interest Data to Find Trading Range of Nifty Future


Many traders told me that they find it difficult to judge the range of nifty future for short term, so today I am here with an article that will teach you how to find that exact top and bottom range for complete F&O series. First of all you should know what open interest is in Future and Option.

I will explain this with an example:

Trader A sells 1 lot nifty, trader B buys 1 lot nifty – Total open interest at this point is 2 lots.
Trader A buys 1 lot nifty, trader C sells 1 lot nifty – Total open interest at this point is 2 lots.
Trader D buys 1 lot Nifty, trader E sells 1 lot nifty – Total open interest at this point is 4 lots.

After knowing what open interest is, let get back to point

Market Range for Short term:

Upper range: Strike price of the call option having highest open interest out of all call option for that instrument.
Lower range: Strike price of the put option having highest open interest out of all put option for that instrument.
Understand this with an example: Nifty 5400 call option has highest open interest in all nifty call option, so higher range for nifty future in short term is 5400. Nifty 5100 put option has highest open interest when compared with all nifty put options, hence lower range for nifty future in short term is 5100.

Traders must keep in mind this strategy will work when time (in days) of expiry is between 18 to 10 days.