Derivative Markets – Open Interest Analysis

Stock Futures which gained open interest along with changes in price might indicate the accumulation or distribution pattern. The below table provide details of Fresh long / Fresh Short / Long unwinding / Short Covering indication by following traditional open interest analysis using price / premium and Open interest

Derivative Markets - Open Interest Analysis



How to use the above table?

Open Interest Analysis helps traders to understand the stronger hands action
  1. Fresh Long Indicates = Positive Changes in Open Interest + Increases in Premium + Price Gains
  2. Fresh Short Indicates = Positive Changes in Open Interest + Decreases in Premium + Price Fall
  3. Long unwinding Indicates = Negatives Changes in Open Interest + Decreases in Premium + Price Fall
  4. Short Covering Indicates = Negatives Changes in Open Interest + Increases in Premium + Price Gains

Fresh Long – Near term bullish  | Fresh Short – Near term Bearish

Long Unwinding – Sharp Price fall is expected

Short Covering – Sharp Price Rally is expected