InvestorQ : What can we interpret realistically from the accumulation of out of the money calls and put options?
Ria Jain made post

What can we interpret realistically from the accumulation of out of the money calls and put options?

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Arti Chavan answered.
1 year ago
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This is a very important indicator as OTM puts and calls indicate two key things. Firstly, it is an indication that institutions are active in these OTM puts and calls as only then you find a sharp accumulation in open interest. Secondly, it also shows that there are expectations of a sharp movement in the market. Take the case of the recent fall in January/February and the sharp rise post the budget. From the beginning of January, there has been consistent accumulation in OTM puts, clearly indicated by the open interest. Not surprisingly, the markets corrected almost 10% from those levels. On the other hand, just after the Union Budget announcement on Feb 29, one could see aggressive accumulation of 7200 and 7300 strike call options on the Nifty. The Nifty subsequently rose sharply by about 700 points. Such data is available on a real time basis and you can get an idea of the accumulation when you compare it with the previous day’s data.

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