OI Data Explained: How to Read Open Interest for NIFTY and SENSEX

Every option chain in India has a column called OI. It is one of the most useful numbers on the screen, and one of the easiest to misread. I trade index options and built OIData, an open interest analysis app, so I spend a lot of time with these numbers. This post covers what OI data is, where it comes from, how it changes through the day, and the five ways I read it for NIFTY and SENSEX.

What OI data is#

Open interest (OI) is the number of contracts that are still open: bought and sold, and not yet closed or expired. It is counted for every contract separately, so the 25,000 call expiring next Tuesday has its own OI, and the 25,000 put has another.

Every contract has two sides, a buyer and a seller, so OI counts contracts, not bets. That is why the same number can rise or fall for different reasons:

• A new buyer trades with a new seller: a new contract opens and OI goes up.
• Someone hands their position to someone new: the contract stays open with a different owner, and OI does not change.
• A buyer and a seller who both held positions close them against each other: a contract closes and OI goes down.

Volume is different. Volume counts every trade made today, however briefly the position was held; OI counts what is still open. A strike can trade heavily all day and end with almost no change in OI, because the same positions kept changing hands. OIData's blog has a longer piece on open interest vs volume.

One small trap: some screens show OI in lots and others in quantity (lots multiplied by the lot size, which the exchange revises from time to time). Compare numbers in the same unit.

Where OI data comes from#

The exchange counts open interest for every contract: NSE for NIFTY, BANK NIFTY and stock F&O, and BSE for SENSEX. It changes through the trading day as positions open and close, and every broker's option chain shows it. After the close, NSE also publishes participant-wise open interest: how the day's open positions are split between foreign investors (FIIs), domestic institutions (DIIs), proprietary traders and everyone else (clients).

In OIData, the numbers come from the market data available through your own broker connection, refreshed roughly every 30 seconds during market hours, and OIData keeps a record of each session so you can go back over it later.

The five ways I read OI data#

1. OI by strike: where the positions sit#

Lay call OI and put OI side by side for every strike and the heavy strikes stand out. Option sellers usually hold the biggest positions, so traders read these levels from the sellers' side: the strike with the most call OI is often read as resistance, because call sellers lose if the price climbs past it, and the strike with the most put OI as support, for the same reason on the way down.

These are levels people are defending, not promises. In OIData, OI Stats draws the whole ladder as bars, so the walls are obvious without reading digits.

2. Change in OI: what is being built today#

The total OI at a strike piles up over the whole life of a contract. The change since today's open is what tells you about today. Say the price is near 25,000 and the 25,100 call holds a large OI, but its OI has fallen sharply since the open. The wall is still the biggest on the screen, but the sellers holding it are leaving, which is the opposite of what the total suggests.

That is why I read the change column before the total, and why OIData's option chain puts the change and its percentage beside every OI figure. More on this in OIData's post on change in OI.

3. OI with price: the four build-ups#

OI alone has no direction. Paired with the price, it does:

• OI up, price up: long build-up. New buyers are paying up.
• OI up, price down: short build-up. New sellers are pressing.
• OI down, price up: short covering. Sellers are buying back.
• OI down, price down: long unwinding. Buyers are getting out.

For an option, "price" means its premium. The same four readings apply to futures, where they are cleaner, because a futures position has no strike and no seller's view of a level to untangle. OIData's post on the four build-ups has worked examples.

4. The put-call ratio#

The put-call ratio (PCR) is the total put OI divided by the total call OI. Read from the sellers' side again, a PCR above 1 means more puts than calls are open, which traders usually read as sellers expecting a floor, and below 1 as the opposite. OIData's option chain reads PCR above 1 as bullish and below 1 as bearish.

PCR is a summary, and summaries hide things. A very high PCR can mean a crowded market as much as a confident one, and one far-away strike can move it a lot. Watch which way it is heading through the day rather than one value. OIData's blog explains how to read PCR without getting fooled.

5. Futures OI, and who holds it#

Index futures show direction more plainly than options, and NSE's daily participant figures tell you who is on which side: whether foreign investors are net long or net short index futures, for example, and how that changed from yesterday. OIData's Futures OI and FII / DII Activity pages cover both, and its blog explains participant-wise open interest.

When OI data moves the most#

OI often moves most in the morning, as the day's new positions go on, and around expiry. NIFTY's weekly options expire on Tuesdays and SENSEX's on Thursdays, and NIFTY's monthly contract on the last Tuesday of the month; when an expiry day is a market holiday, the expiry moves to the previous trading day. On expiry day OI falls quickly as contracts are closed, so a falling OI that day means something different from a falling OI on a Wednesday.

Five mistakes with OI data#

1. Reading OI as direction. Every contract has a buyer and a seller. OI says where positions are, not who will win.
2. Looking at totals and ignoring the change. The total is history; the change is today.
3. Mixing expiries. The 25,000 call of this week and of next month are different contracts with different OI. Make sure you are reading the expiry you trade.
4. Trusting one snapshot. The levels move during the day. Check how a strike got there, not only where it stands. OIData's Session Chart and Strike History exist for exactly this.
5. Treating a level as a promise. A heavy strike is defended until it is not. Read OI alongside price, never instead of it.

Where to read OI data#

Your broker's option chain shows OI and its change, and NSE and BSE show option chains on their own websites. That is enough to start. An analysis tool earns its place when it adds what those screens leave out: the session's history, the change across strikes as a chart, the build-ups labelled for you, futures and participant data in the same place, and alerts.

That is what I built OIData to do, for NIFTY, BANK NIFTY, SENSEX and every F&O stock. It shows information for your own research and never tells you to buy or sell; it is not a SEBI-registered investment adviser. There is one plan, Ultimate, at ₹1189 a month or ₹10,701 a year. I also wrote about what to look for in an open interest analysis tool, whichever one you end up using.

If you are just starting, OIData's posts on what open interest is and how to read the option chain are good next steps.