Vtrend

FII have net sold 1300 contracts today. They have more or less day traded today. It is interesting to note that their OI has decreased by 10K contracts.
The PCR has increased to 1.12 today - indicating more activity in the Puts. The gap up open has been used to write Puts at a number of strikes.
The Desi MO is moving quite rapidly on either side indicating the rallies or falls are spread across the spectrum.
When I try to calculate the area of a pond, I will guesstimate the radius of the pond and multiply the square of it with 3. In an examination, when I am asked to calculate the area of a circle, I would measure the radius using scale and I would be using 3.14 as the value of Pi. However, when the area of my wrist watch is calculated, probably the Pi has to be taken with far greater precision. My point is, we actually do a trade-off for the accuracy against the purpose of the operation, difficulty in calculation and risk involved in error.
With the above statement as a backdrop let me explain - where and all I use averages in my data - and to what ends I use them.
Firstly, I try to deal with No. of Contracts as has been shown in the bold above. It is the number of contracts sold or bought - and it has nothing to do with lot size - whether it is 25 or 50 or 10.
Secondly, I calculate the average Buy price and average Sell Price. Now, before the trigger is pulled against me, let me explain, the purpose for which these two averages are used. Let me take the case of today's average Buy price and average Sell Price - located in columns D21 and G21 of the data sheet. The average Buy price is 5418 and average sell price is 5457. Today NF has traded between 5420 and 5470 for the most part. So, it basically tells me that FII have sold at highs and bought at lows of the day. For me, it actually does no harm, to think that these average prices are having some small error - ( I will come to the calculation of error percentage later) - My point of interest in using the average is to plot the day against FII activity. For example, today NF opened low, and traded at highs towards later part of the day. It basically means that FII bought in the morning, and booked large part of day buyings in the afternoon. They did not carry much of today's bought contracts. I hope all of you agree with me that, to make such directional judgements, even if the averages are skewed by a percent or two - it does not matter - simply because each day, the averages are skewed approximately by the same amount - and we are looking at their relative activity.
Further, I calculate the net contracts bought/sold, their value and their average. This also is calculated for a different purpose. Let me explain - Today, the average price comes to an absurd 7315. What do we do with it? Here is a small example. I buy 5 apples at 10Rs each - and sold 3 of them at 14 Rs. each. My average price for the remaining 2 apples is - (5*10-3*14)/2=4Rs. The low average of the remaining tells me that I bought low and sold high, and am carrying my buyings for the next day. Take the exact converse of this example - when the average is very high. It indicates that I am carrying my sellings to the next day. So, basically the net average price tells me what is it that the FII carried to the next day. Even here, the average even if it is wrong by a percent or two - it should not matter. We are using these averages as directional indicators.
Now, let me come to the average OI contract value which I refer to as FII SAR. This is calculated as the average price of OI each day -which changes according to settlement price. Though there are quite a few reasons why I started using it as an important price - it is here that the accuracy of the calculation is important - atleast it is more relevant here than any of the earlier use cases. So let us analyse this aspect in more detail.
As on 13th March, the Net OI in March Series in Nifty Futures is at 2,50,84,500. The OI of Bank Nifty at the same time is 12,04,475. So Bank Nifty OI occupies 4.8% of NF OI. Assuming FII are holding some positions in other indexes like Mini Nifty, CNX IT etc. - it is safe to assume that - all the rest of the futures will occupy 8% of NF OI. The basis for 8% in the below table is due to this fact. Please refer to the table below:
Instrument No. of Contracts Lot Size Average
Day Price Total Value
(B*C*D) Average Price
(E/C/B)
NF 300000 50 5430 81450000000 5430
BN(8%) 24000 25 10700 6420000000 10700
Net 324000 50 87870000000 5424.07
In the above table - the explanation for the numbers are like this. On an average NF trades 3L contracts daily. If you are not comfortable with this number, feel free to take any other number. So, BN will be trading approximately 8% of that using the above approximation. So, 24K contracts of BN have been traded. Now, the FII data will show us FII have traded 3.24L contracts. The lot size of each instrument - and the average traded price of the day are taken - to simplify the calculations. Assuming NF has traded at an average price of 5430 through the day and BN has traded at 10700 - the total value of each is calculated - by multiplying the lot size, traded contracts and average price. Their total is calculated at 8787 crore which is the number given to us in the FII data sheet. Now, I am taking the average contract size as 50 - and calculating the average price for the contract by dividing the total value with total contracts * lot size(50) - that is giving me an average price of 5424 against the actual average of 5430. Ladies and Gentlemen, I admit that I am inaccurate from the actual result by a whopping 0.1%.
As a trader, I will be watching a price zone rather than a price point. I mean - when I say FII SAR is 5424 - it does not mean that hell will break if the price moves by a point below or above. I am more interested in watching the price behaviour around that area - give or take x points either side.
To conclude, As I said above, our accuracy is a tradeoff between risk, purpose and ease of usage. I felt that I am not doing a sin by the compromise that I made in calculations - I mean - it is the best trade off I could have arrived at - given my parameters of evaluation and my trading purpose. If there is a better method to make use of the data, I request the esteemed readers to point out - so that I can correct myself.
You can find the entire data sheet here.





Instrument No. of Contracts Lot Size Average
Day Price Total Value
(B*C*D) Average Price
(E/C/B)
NF 300000 50 5430 81450000000 5430
BN(8%) 24000 25 10700 6420000000 10700
Net 324000 50 87870000000 5424.07




Dear Friends, now that I have presented whatever information that I have - I would like to admit that It will be difficult to continue writing this notes any further. However, I assure you that the data sheet will be updated on a regular basis. As I have repeatedly said, in my earlier posts, you do not need my colored glasses to analyse the datasheet. It is a piece of data - and every one can process it in their own way and arrive at their own conclusions. If the notes along with the datasheet, did help even one person, in their trades - it has served its purpose.