Lesson
6 min read
Reading open interest and PCR honestly
What open interest, build-up labels, the put-call ratio and max pain can and cannot tell you.
Open interest (OI) is the number of contracts still open. Every contract has a buyer and a seller, so OI by itself says how much is at stake, not who is right.
- Long build-up: price up and OI up. Short build-up: price down and OI up.
- Short covering: price up and OI down. Long unwinding: price down and OI down.
- These are descriptions of the day's trading, not forecasts. The same label can precede a continuation or a reversal.
The put-call ratio (PCR) by OI is total put OI divided by total call OI. It is often read as contrarian sentiment, but its normal level drifts with how much hedging is going on and differs between weekly and monthly expiries, so a reading means little without its own history.
Max pain is the strike at which option buyers as a group would lose the most at expiry. Prices sometimes settle near heavily traded strikes, but max pain is a calculation on open positions, not a target.
The Positioning tab shows FII index-futures positioning with what the next five sessions did after each decile, each with its sample size. Read the sample size and the spread of outcomes before reading anything into one level.
Try it in the F&O hub
Opens the tool with this structure on today's NIFTY chain. Reading is free with an Arthfy account; some runs use free attempts.Open the option chainOI, OI change, build-up and PCR per strike
Open PositioningFII positioning with its historical outcomes
