Nilesh Sharma on Streamlining Options Trading with OI Analysis at Samco

SAMCO implements a quantitative approach to provide differentiated solutions that empower their customers.

Source: Samco 

Open interest (OI) is a crucial yet often overlooked metric in formulating options trading techniques. Unlike trading volume, which measures the number of contracts traded, OI represents the total number of outstanding contracts at any given point in the trading day. This vital indicator gives traders crucial insights into liquidity, price direction and market sentiment.  

OI-based options trading techniques have gained traction among savvy traders today because of their ability to reveal underlying market dynamics. By analysing OI data, traders can identify market trends, gauge the strength of price movements and even anticipate potential trend changes.  

Nilesh Sharma, ED & President of Samco Securities, reiterates that analysing OI spurts is an effective options trading technique often overlooked. This essentially involves evaluating contracts that display sudden increases in open positions — which may signal significant market activity.  

Understanding OI patterns like long buildup, short covering, short buildup and long unwinding can give traders a competitive edge. When combined with price action and trend analysis, these OI patterns form the foundation of sophisticated options trading techniques.  

Decoding Intraday Trading Using OI Spurt Data  

The National Stock Exchange (NSE) provides valuable open interest spurt data updated on a real-time basis. This information can be a goldmine for intraday traders because it offers insights into the contracts that have recorded significant OI changes. The more the changes in open positions, the higher the possibility of large price movements.  

To help traders leverage this data effectively, Samco’s Nilesh Sharma outlines a multi-faceted options trading technique that combines trend evaluation, OI interpretation and price action analysis.  

“Traders should first identify stocks that have shown a sideways trend during the previous trading day. This could be a sign of a potential buildup of momentum for a price breakout or breakdown.  Next, traders should analyse the OI spurt data, particularly focusing on the crucial opening minutes. During this window, they must look for specific OI patterns that align with their directional bias. For bullish opportunities, long buildups (increasing OI and prices) and short covering (decreasing OI with rising prices) are preferred. Conversely, bearish setups are ideal if traders notice short buildups (increasing OI with falling prices) or long unwinding (decreasing OI and prices). Price action is the last piece of the puzzle. It is best observed on 5-minute charts. Traders must look for a convincing breakout above the resistance level or a strong breakdown below the support level. This helps confirm the signal from the OI data.” 

Nilesh Sharma, ED & President of Samco Securities

This comprehensive options trading technique allows traders to make informed decisions and increases the probability of successful trades. That said, Nilesh Sharma warns that while OI spurt data can be extremely useful, it should be used in conjunction with other technical and fundamental analytical tools for optimal results.  

Spotting Intraday Gems with Samco Securities  

Samco Securities offers an agile and user-friendly trading app that gives traders up-to-date insights on open interest buildup and spurts. This integral feature provides a comprehensive overview of OI changes and allows traders to identify promising intraday trading opportunities.  

By analysing OI buildup patterns, traders can gauge the sentiment and strength behind price movements and spot potential market movers quickly. A sudden increase in OI at specific strike prices may indicate strong support or resistance levels, while a broad buildup across multiple strikes could be a sign of a trending market.  

Samco’s OI buildup tool also helps identify options with increasing liquidity — which is a crucial factor for smooth entries and exits. By using options trading techniques that focus on significant OI buildup, traders can potentially reduce spillage and execution risks. The tool’s real-time updates also ensure that traders stay ahead of the curve and spot emerging trends before they fully materialise into price action. Intraday traders can use Samco’s OI buildup feature to select stocks more effectively and initiate potentially profitable trades.  

The Need for Speed in OI Strategies 

Intraday trading occurs over a very short time frame, which is why the ability to quickly interpret and act on OI data is crucial for intraday traders. Market conditions can change rapidly and opportunities often present themselves in brief, fleeting windows of time. This demands swift and agile decision-making.  

OI-based options trading techniques also require traders to analyse multiple data points simultaneously. They must analyse OI changes, correlate them with price movements and factor in overall market trends — all within a matter of minutes or even seconds. This speed is crucial for capitalising on emerging opportunities before the market adjusts once more.  

Moreover, the competitive nature of intraday trading means that many eyes are watching the same OI data. Those who can quickly spot and act on significant OI changes gain a unique edge over slower market participants. This advantage can mean the difference between entering the market at a favourable price point and missing the move entirely.  

To excel at OI-based options trading techniques in the intraday time frame, traders require a keen eye to discern patterns and the skill to make rapid yet calculated decisions. Regular practice and experience can help hone these skills, but the right tools and techniques are also crucial in this journey.  

Breaking Down the Challenges of Using Multiple Trading Platforms 

Traditional trading setups involve a fragmented approach where traders must juggle between multiple platforms for analysing and executing different options trading techniques. This disjointed system can lead to inefficient trading methods, missed opportunities and a higher potential for errors.  

Samco’s Nilesh Sharma elaborates on how these problems can exacerbate the issue of high losses in the F&O segment.  

“Typically, traders might use one platform for chart and technical analysis, another for creating and testing strategies and a third platform for executing their orders. This multi-platform approach complicates the trading process and introduces time lags that can be highly risky in fast-moving markets. The constant switching between platforms can also disrupt a trader’s focus and flow, so they may lose sight of important market developments. Moreover, the need to manually switch between platforms increases the risk of data entry errors — which can have costly consequences in options trading.”   

Nilesh Sharma, ED & President of Samco Securities

It is in response to these challenges that Samco’s Options B.R.O. has been developed for traders today. Samco Securities has consolidated all essential trading tools — including OI buildup analytics, options Greeks, Options B.R.O. and more — into one agile trading app.  

The Samco Trading App: An All-in-One Solution for Advanced Options

Samco's trading app addresses the challenges of fragmented trading tools by offering a comprehensive and integrated solution. The app features TradingView charts, which provide traders with powerful technical analysis tools right at their fingertips. This seamless integration allows traders to analyse the markets quickly and efficiently without having to switch between applications.   

Samco’s Options B.R.O. goes beyond charting and facilitates advanced options strategy building within seconds. Traders can zero in on the best strategies based on their market outlook, analyse complex strategies in-depth and assess potential outcomes in real-time — all within the same interface.    

The platform's crowning feature is its one-click trading functionality, which enables swift execution of trades as opportunities arise. Together, the many features in the Samco trading app save time and reduce the risk of errors associated with using multiple platforms.      

SAMCO Securities was incorporated by Mr Jimeet Modi, Founder & CEO of SAMCO Group in 2015. As one of country’s leading flat-fee brokerage and wealth-tech platform, SAMCO Securities provides retail investors access to sophisticated financial technology and makes their wealth-creation journey simple, informed, and cost-effective. SAMCO Securities' mission is to eliminate the existing challenges faced by traders and investors and democratise access to the wealth management process for every Indian. With customer centricity at SAMCO’s core, they implement a quantitative approach to provide differentiated solutions that empower their customers in acing the capital markets. SAMCO Securities is pioneering the stock market trading by introducing industry-first features like My Trade Story, Personal Index and Trade Spread Sheet to name a few under its CRP strategy.