Sector Analysis of FnO data – How to see the bigger picture ?

November 21, 2014 Anuraag charts, data, ranges, trends data, sectors

One of the best ways to pick a winning trade is through a top down approach . First identify the sector showing a trade opportunity and then look for the best stock in it.

In MyFnO, we have always strived to figure out how we can deliver that extra edge using F&O data.

And today we are proud to introduce to be seen for the FIRST time anywhere –
Sectorwise Charts with aggregated F&O data of price, oi, volume, rollover, basis, iv, pcr, delivery
(P.S. avaliable in PLATINUM plan only)

Computation methodology used ->

For Open Interest (OI), Future Volume, Delivery, we calculate in Value terms (INR cr) and add up the Total of all the sector components so that they can be compared on a common base.
For others like basis,iv,pcr,rollover we take the Average at any tick point of all the sector constituents
For price we compute a simple average index where the initial price of each stock in the sector is rationalized to base 100

This sectoral data can now be beautifully analyzed across various modules in MyFnO

Our favourite one is the “Trends” page where you can get a clear understanding of the action happening across sectors in one screen all together. Click below image to see full screen

Now you can also see a full Sector Chart for the first time with aggregated F&O data & Technical indicators combined together in one screen !

In Markets page , you can also see Sector wise TopX gainers/losers across aggregated sector data like price%, oi% , avg premium/disc %, avg Rollovers % / delivery% etc.

In Sectors page itself you can see % changes of various F&O aggregrated parameters across any time frame/interval.. be it Days/week/Month or any custom N days.. or even intraday of 5/10/15/hourly changes. so you know where the action is taking place. You can also use this interval chg in other screens like Markets, Heatmap, etc. whereever applicable

In Changes page you can see smooth trends with colored heatmap where it is then easy to identify regions of sector weakness/ strengths and turnarounds

In Ranges page you can lookout for sectors where F&O data reaching extremes of the period ranges and especially if there is a gap or divergence of 2 parameters like price & oi

In Compare page you can actually compare for eg. F&O data like Sector avg Rollover % across ‘monthly’ time frame in a easy to analyse graph

So as you can see there are various ways to see the bigger picture in action happening across sectors. It is all out there for you to see. Just waiting for you to spot it !

Pairs Trading – the art of making profits

September 29, 2014September 29, 2014 Anuraag strategy pairs, strategy

What Is Pairs Trading?
Pairs trading (also known as statistical arbitrage or spread trading), has the potential to achieve consistent profits through simple and relatively low-risk positions. The pairs trade is market-neutral, meaning the direction of the overall market does not affect its win or loss.

The goal is to match two trading symbol that are highly correlated, trading one long and the other short when the pair’s price ratio diverges “x” number of standard deviations (i.e. the zscore). If the pair reverts to its mean trend, a profit is made on one or both of the positions.

How to decide on a good pair trade is explained step-by-step in a easy to understand one-page pic –>

Click on any pair box to drilldown into more details to analyse it furthur->

NOTE: the Buy/Sell signal above implies for the stock ‘A’

Why Pairs Trading?
Pairs trading is a market-neutral strategy that boasts several advantages:

Controlled risk
Since one position is long and the other short, an automatic hedge is created, so even if market or the sector goes down, the losses on the long position will be offset by the gain in the short position.

Profit regardless of market direction
Another attractive feature of pairs trading is the ability to profit whether the market is going up, down or even sideways. This is because the strategy does not depend on market direction, but it’s the relative performance of the two instruments that determines each trade’s outcome.

No directional risk
Because profits depend on the relative price change between the two instruments, rather than from the direction in which each moves, directional risk is removed.

What are the risks involved ?

No strategy can be without risks, else it would be a money-making machine.

What we are trying to bet on is that if a stock outperforms relative to the other, and they generally have always moved together in the recent past, the underperformer should eventually catch up towards the mean & we could make a profit.

But what if the outperformer continues to outrun the other stock because of some specific news or event in that stock? So we must have stop losses in case the crossing of our SD line continues to break through & run away.

And that is why if you observed in our pic above.. the buy /sell signals which the MYFNO.com app auto-generates are only after the ratio AFTER crossing outside the 2SD lines comes BACK inside the band .

Will suggest you to first get confidence in this concept , by trying out some paper trades before actual venturing into real trading . You can also track the pairs you identify to a favourites Pairslist in the myfno app or even enter dummy trades to track in the its portfolio module. All tools in one app 🙂

So happy pair trading !!

The PutCall graph – finding the option strike tipping point

September 26, 2014September 26, 2014 Anuraag Uncategorized charts, options, putcall

The PutCall data at various strikes if seen as bar graphs ( especially the ‘change’ data) can give a birds-eye view of how the open interest is building up across Put/Calls at various strikes / expirys and where the buy-sell pressure should take place at which tipping point .

all explained in our one-pic selfies –>

markets look to sustain now & can rise from here as the putcall ratio seems to be turning up again ! 🙂

Powerful Alerts – F&O + Technicals in one screen !

September 12, 2014September 12, 2014 Anuraag Uncategorized

We’ve now built a powerful yet simple ALERTS screen in myfno.com (under the ‘INFO’ menu) where you can get important alerts of F&O indicators + Technical signals together in one screen during the live market also 🙂

High/Lows (day/week/month/year) for F&O data like
Price, OI (Open Interest) , IV, Basis, Rollovers
Volume spikes , bulk deals in futures/options
Long/Short buildups
Rankings changes,
Technical signals – MACD / Stochastic / RSI etc.
Candles – ( buy /sell patterns )
Moving average ( crossovers /breakdowns )
Trend reversals ( small/medium/long term)
Pivot levels cross ( support/resistance levels)
VWAP levels (above/below cross)

You can see these alerts filtered for any scripgroup/sector/watchlist

You can also show alerts just for Stock only (summarized F&O data of all 3 month contracts) or even individual contracts of Futures / Calls / PUts by pressing their respective underlined letters or choosing under the ‘Show’ menu

You can also customize your view to just show your specific set of alert categories. This can be done by clicking the + / – buttons besides the category header to add/remove 5 rows at a time. and then you can save this view for re-use

Finally, you also have the power to do a quick find in the ‘find box’ by typing words to match in the set of alerts displayed eg.

you can type ‘year‘ to display only yearly high lows or
you can type a symbol say ‘ACC‘ to see all recent alerts of this stock or
type ‘cross’ to see all crossovers

How to find a buy today, sell tomorrow stock

September 3, 2014September 7, 2014 Anuraag Uncategorized

We may have all heard people saying that maximum money is made in the first few minutes or the last few minutes of trade. But how to identify such opportunities and scan for this kind of high price/volume/oi action one needs the right tools and the keen insight to read such info.

In www.myfno.com we have created one such critical tool that can help you in just this.

In our app, you can actually see the %CHANGE in price/volume/oi between any custom time frame / interval.

So if in the last 15 minutes of trading session, if we set this %chg parameter to say 5 minutes from the interval menu as shown in the pic, then we can precisely see any action happening in just that last X minutes chosen, so any sharp price/volume/oi spikes are visible & can be used as a base to identify the high %chg stocks.

Essentially we can identify where positions are being taken at the end of the day by the ‘smart traders’ for selling the next day ( BTST – buy today , sell tomorrow )

Now these 5/10 min %chg we can see in many screens like

Markets
HeatMap
AdvanceDecline
Futures

I personally like to see the AdvanceDecline screen in myfno.com because besides the %chg, it also groups the stocks sectorwise, so i can see if the whole sector is also where the ‘smart money’ is moving in.

How to identify and what to look out for i’ve explained in this selfie – self explanatory one-page pic 🙂

some more candidates we identified with this funda so you could get a better idea of how to use this with more examples –>

We have created a readymade template for you to see price/oi/vol in advancedecline in a 10 min timeframe. Members can Just click on this link to see it live in action –>

https://www.myfno.com/#advancedecline/ALL/POV-10min

FnO Indicators – how to read in between their lines

September 2, 2014September 10, 2014 Anuraag Uncategorized charts, data, indicators, trends

MyFnO specializes in F&O data / indicators and it is for a reason.

These parameters add that extra edge into chart reading and can signal important trigger points for a trend change

the definitions of F&O indicators we’ve already laid out in our post on our post–>
F&O data … the basic fundas

and how best to make use of these F&O indicators is best laid out with some examples in our one-page pic –> ‘selfie’ explainatory 🙂

( click image below to zoom into image –> )

you can see all these parameters combined in the ‘charts’ module also –>

you can also see them one by one overlayed in the ‘trends’ module–>

Unravel the mystery behind rollover costs

August 28, 2014September 2, 2014 Anuraag charts, data, trends price trend, rollover

We have all heard about rollovers & some even the rollover cost, but how do we interpret & how do we see if it signals a change in price trend

the definitions we’ve already laid out in our post on our post–>
F&O data … the basic fundas

Essentially rollover% is an indication of how much % of positions is getting rolled over to the next month ( be it long or short) .. and a higher rollover% indicates that the base direction for the next expiry action is set strongly by the bulls/bears prior to its beginning itself.

And whether the price trend reversal will be up or down can be seen clearly by a positive/negative or a change in the rollover cost which essentially in the price of next month future – current month future expressed as a %percentage premium/discount

So wondering how the rollover% and especially the rollover cost works out during the expiry / rollover week and what it gives a hint of ?

Well, what better way to showcase it in various scenarios than through a single ‘selfie’ to understand pic –>

the mystery behind rollover costs

the above pic is is for a month trend.. to see expiry day trend you can choose daterange as ‘1d’, so that you can see if there are any last day rollcost changes/reversals happening in long/short buildups , indicating where the buy/sell pressure is taking place.

to see what how you could have made money on the last trading day of the expiry see this example–>

rollcost on the expiry day itself!

To view this live in one-single click you can directly goto our directly created ‘Rollcost’ view template in the ‘Trends’ module –> https://www.myfno.com/#trends/ALL/rollcost

The trick i used to find this turnaround stock

August 19, 2014September 2, 2014 Anuraag charts, data, ranges

I like to see stocks which are near their high /low range . And not only in terms of price , but also other F&O parameters, especially Open Interest (OI) and Delivery.

Why ? because OI itself is like a pressure cooker, there is a limit to how high can it go, and at the tipping point either the bulls or the bears will eventually give in, and the price would flow in the reverse direction. And if coupled with high delivery volumes, it is like a sure shot .

But how do identify if these parameters are near their high/low ranges from so many F&O stocks in a quick & easy way? For this the “Ranges” screen in the MyFnO app comes real handy.

The trick of finding such stocks is shown in our one-page pic –>

NOTE: I personally like to choose ‘percentile‘ form of data as that gives me how many % of times the value has been below the current value

F&O data – the basic fundas

August 1, 2014September 7, 2014 Anuraag data basis, charts, data, delivery, iv, OI, open interest, PCR, rollover, volatility

The Basics (not the usual price/volume):

Open Interest (OI) :
in simple terms, this is the net number of long/short positions outstanding at any given point of time. For each buyer of an F&O contract there must be a seller.

From the time the buyer or seller opens the F&O contract (call/put/future) until the counter-party closes it, that contract is considered 'open'.

A large open interest indicates more activity and liquidity for the contract. The more the buildup the heavier the counter becomes, and depending on who comes out stronger, the bulls or the bears, the price follows.
Basis (premium/discount) :
is the difference of the Future price over the underlying spot price. It essentially is a bullish/bearish indicator of whether the buyer is willing to pay extra premium & expects the price to rise in future, or whether the short-seller is selling at a discount thinking the price is going to fall in the future. When expressed as a percentage it is called the basis% and is calculated as

basis% = 100*(future-spot)/spot.

CoC (cost of carry) is nothing but the basis computed in annualized terms, as good as the rate of interest for carrying the position forward.

Coc=(basis% *365) / (days-to-expiry)
Near (1), Next (2), Far (3), Long (4) : the data for the 3 month’s series we can see break up as

near: for current month(1)
next: for month 2
far: month 3
long: for long-dated contracts beyond the 3 regular months
Rollover : is a close estimate of how many future positions are actually being carried over to the next month series, (but no one actually knows the actual figure, it is just a notional assumption). The formula we use is :

Rollover% = 100 * (OI_Next(2) + OI_Far(3) )/ (OI_future of all 1+2+3 months combined)
RollCost: is essentially the difference in the next & current month ‘Futures’ price only i.e. the premium/discount the buyers/sellers are willing to pay to roll their positions to the next month. A positive rollcost generally indicates that a bullish position is being rolled or built for the next month and a negative rollcost indicates a bearish one

RollCost% = 100 * (Price_Next(2) - Price_Near(1) )/ (Price_Near)
Implied Volatility (IV) : in simple terms it is how much volatility the market is expecting in the future ( vis-à-vis the Historical Volatility HV which is calculated from the past price movements). A higher IV means people expecting a lot of volatility & are thus willing to pay a higher price / premium in options to protect their interests. A lower volatility means people are getting comfortable with current market scenario.
For IV we use black-scholes formula to calculate IV for each strike, using futures price for underlying & zero interest rate ( since all are European options). Then we apply a volume-weight and calculate overall IV of a symbol through a volume-weighted avg of IVs across strikes to arrive at one common IV for that stock/symbol i.e.

IVsum = (IV1*Qty1) + (IV2*Qty2) + ... (IVn * Qtyn) QtySum = ( Qty1 + Qty2 + ........... QtyN) IVavg = IVsum / QtySumwhere 1,2,…N represent individual strike contracts
PutCall Ratio (PCR) : a barometer for investor sentiment, it is the ratio of the open-interest positions of Puts to Calls.

PCR_OI = OI_Puts / OI_Calls

A very high PCR can trigger a fall and a very low PCR can trigger a rise in in the markets. There is also a PCR for volume which is a ratio of puts traded to calls traded, representing bullish/bearish sentiment for traders.
Delivery : it is the positions carried over trading sessions in the cash market of all exchanges combined

(i.e. it goes into the demat account of the trader’s portfolio).

Delivery is to cash market like OI is to derivatives market. Spikes in deliveries are indicators that major price action can happen from that point, as it forms a support or resistance, depending on whether big positions have been built up or offloaded.

What we show in myfno.com is 3 unique things –>
1. BSE + NSE delivery qty combined
2. delivery% of the total both exchanges traded quantity to get an overall pic
3. delivery %change vis-a-vis the previous day.. so any delivery spikes can be visible if delivery_chg>100%

Magic of the PCR (putcall-ratio)

August 1, 2014September 18, 2014 Anuraag charts calls, charts, OI, options, PCR, puts

The Put-Call ratio (PCR-OI) has a very simple definition

PCR = Open Interest of ALL Puts
Open Interest of ALL Calls

Albeit its simplicity, it is a very powerful indicator, as it actually gives a sense of where the market is heavy –> on the buy or sell side.

Remember we use the PCR of OI (open int.) and NOT volume.

Since OI by its nature itself is cumulative, (i.e. builds up over trading sessions) and has the inherent property of quantifying positions being ‘open’ i.e. how much money is at stake.

So, any pressure from either bulls or bears can take the market in their direction.
It is just that who has the upper hand & takes the lead, and of which we can get a sense of understanding through the magic of PCR 🙂

My observations are highlighted in the picture below.

NOTE: Like any other indicator, this is not to be seen in isolation, but used as a confirmation along with other parameters to confirm any view on the market.

Today on 18 Sep 2014, Markets again went up almost 2%.. but just see what was happening in PCR ( a U-turn) a day before from 16th to 17th sep. which is generally a signal of trend reversal in the making –>

MyFnO Mantras

the secret fundas of derivatives trading !

Year: 2014