How to Analyze FII Derivatives Data?

| OI Analysis in Options Trading

When a whale swims through the ocean, it creates a wake that can be felt by smaller creatures
and can even shift the direction of the current. It also has the ability to create waves and currents
that impact the entire ecosystem. 

Similarly, when a big player in the stock market makes a large trade or investment, it can cause a
ripple effect that can impact the entire market, causing other investors to follow suit and
potentially change the direction of the market.

Moreover, just as smaller fish may try to follow and swim alongside a whale for protection or to
feed on the scraps left behind, smaller investors or rather the retail traders/ investors may also try
to follow the lead of big players in the market, further amplifying their influence.

Today we’re going to dive into the fascinating world of big players in the stock market,
otherwise known as FIIs. We’ll take a closer look at how these whales of the market play their
game and try to make sense of their activity data using OI Analysis, so we can use it to trade
with the direction of the market. So buckle up and let’s get started!

Table of Contents
 3 Most Important Things While Analysing OI of FIIs
o 1. FII Calls OI
o 2. FII Puts OI
o 3. FII Futures OI

3 Most Important Things While Analysing OI of FIIs

So, now let’s look at what are the most important things to look at in FII data? You need to look
at open interest of:

1. FII Calls OI
Since you are probably trading for the short-term, the above mentioned three data points are the
most important because they are short term bets. Now let us first analyze the calls and puts OI to
form a view of the market. 

We have opened FII Derivatives Data on Opstra where you can find FII,Prop, Retail & DII Index
Open Interest Data for 24th of March 2023. As you can see, there are 8.03 lakh contracts on the
long side which means FIIs are long with close to 8 lakh contracts on the call side that the market
will go up.

While they are short with 6.3 lakh call option contracts, so net net; the difference between long
and short is as follows:

Net Call OI = Long call OI – Short call OI

= 803419 – 633959

= 169460

So the net OI which is the difference between long call OI and short call OI is close to 1.7 lakh
long option contracts, which is a bullish signal

Now let us move ahead to calculate the put OI of both sides.

2. FII Puts OI

There are 8.4 lakh contracts on the long side while they are short with 3.8 lakh option contracts,
so net net; the difference between long and short is as follows:

Net Put OI = Long put OI – Short put OI

= 840844-381338
= 459506

So the net put OI which is the difference between long put OI and short put OI is close to 4.6
lakh long put option contracts, which is a bearish signal

By calculating net OI on both call and put side, you can interpret that if net call OI is greater than
net put OI, then FIIs are bullish in the short term. 

And the opposite is also true, which means when net call OI is less than net put OI, then FIIs are
short term bearish. So now, let us calculate the overall sentiment of FIIs: 

Total Net = Net Call OI – Net Put OI

= 169460 – 459506

= -290046

As you can see, there are 2.9 lakh more contracts on the put side, hence the overall sentiment of
the market can be said as bearish. 

3. FII Futures OI

To analyze Futures FII OI data, you need to follow these steps:

1. The most important piece of information is the OI value of the Index which is a
combination of the Bank Nifty and Nifty. So open Sensibull on your web browser to
access futures FII OI data & as you can see below, the OI value is 213.9 crores, which is
a bullish signal.
 2. The second thing which you need to analyze is the daily activity by FIIs. Pay attention to
the change in the longs and shorts in calls and puts separately. This will give you an idea
of what the FIIs are doing in the market. Here are these four quick data points to need to
look for: 

1. Change in the long OI of calls. In the example given, the open interest in call longs has
increased by 1,05,110 contracts or around 15.1%, which is a bullish signal.
2. Change in the short OI of calls. In the example given, 1,12,668 contracts, which were call
sold, have been exited, which is a bigger bearish signal.

So net change in OI of call = Change in long OI of calls – change in short OI of calls

= 1,05,110 – 1,12,668

= -7,558

A negative number in the net change in OI of the call side indicates a bearish signal. 

3. Change in the long OI of puts. In the example given, the long OI of puts has increased by
81,001 contracts, which means people have purchased more puts.
 4. Change in the short OI of puts. In the example given, the short OI of puts has gone up by
42,718 quantity, which is a bullish signal.

So net change in OI of puts = Change in long OI of puts – change in short OI of puts

= 81,001 – 42,718

= 38,283

A positive number in the net change in OI of the put side indicates a bearish signal. 

By following these steps, you can analyze Futures FII OI data and get a better understanding of
the market. It’s important to pay attention to both the outstanding OI and the daily change in OI
in calls and puts to make informed trading decisions. 

Options trading is real gambling. Well, if you trade options with discretion, you surely are
gambling. And the fact that close to 87% of traders were losing money while trading F&O didn’t
really surprise us. Coz’ what would even happen if you trade without a system in place. And to
help retail traders not make the same mistake, we really want to help you out. No, we’re not here
selling you any course.