Intraday Nifty50 Option Buying: The Simple 2-Step OI Method (Futures OI + Options OI)
Goal: This guide shows an easy, repeatable, and disciplined way to take intraday Nifty50 option buying trades using a two-step process:
In intraday Nifty50 option buying, understanding Open Interest (OI) movements in both futures and options is crucial. This guide combines a two-step approach — starting with the overall futures scenario and then confirming with CE/PE option OI changes — to help you make more confident and logical trade entries.
Why This Strategy Works
Price and OI data reflect the actions of big market participants. By reading these patterns, we can understand whether positions are being created (build-up) or closed (unwinding/covering). This gives early hints about market direction, even before price moves significantly.
- Step 1: Identify overall market bias from NIFTY Futures Open Interest (OI) and price.
- Step 2: Double-confirm with Options OI (CE/PE) near ATM using 5–10 strikes above & below.
Educational Use Only: This is not investment advice. Trade at your own risk with proper risk management.
Why OI Matters (The Logic)
Open Interest (OI) shows how many futures or options contracts are open (still active). Changes in OI tell us if big players are adding positions or closing them:
- Price ↑ + OI ↑: New long positions (bulls adding).
- Price ↓ + OI ↑: New short positions (bears adding).
- Price ↓ + OI ↓: Longs closing (bull weakness).
- Price ↑ + OI ↓: Shorts closing (bear squeeze / quick up-move).
Key idea: First read the Futures to know the big players’ direction (Step 1), then confirm with Options at strike level (Step 2). Trade only when both steps agree.
Step 1 – Overall NIFTY Futures OI Scenario (Sets Your Bias)
Use any reliable platform (Angel One, Fyers, Sensibull, GoCharting) that shows Futures Price + Futures OI change.
| Futures OI | Price | Scenario | Meaning | Bias |
|---|---|---|---|---|
| OI ↑ | Price ↑ | Long Build-up | Fresh longs added in NIFTY futures | Bullish → focus CE |
| OI ↑ | Price ↓ | Short Build-up | Fresh shorts added in NIFTY futures | Bearish → focus PE |
| OI ↓ | Price ↑ | Short Covering | Shorts closing → quick up-move | Bullish (often fast) → CE |
| OI ↓ | Price ↓ | Long Unwinding | Longs closing → weakness | Bearish → focus PE |
Rule: Your primary trading direction comes from Step 1. Don’t fight the futures bias.
Step 2 – Options OI (CE & PE) for Double Confirmation
Now check nearest 5–10 strikes above & below ATM on CE & PE. (In Fyers, you can select 10 strikes; in other tools, use 3–5 if that’s the maximum.) We look for patterns:
| Side | Price | OI | Scenario | Meaning | Supports |
|---|---|---|---|---|---|
| CE | ↑ | ↑ | CE Long Build-up | Call buyers active | Bullish |
| CE | ↓ | ↑ | CE Short Build-up | Call writing active | Bearish |
| CE | ↑ | ↓ | CE Short Covering | Call writers exiting | Bullish |
| CE | ↓ | ↓ | CE Long Unwinding | Call buyers exiting | Bearish |
| PE | ↑ | ↑ | PE Long Build-up | Put buyers active | Bearish |
| PE | ↓ | ↑ | PE Short Build-up | Put writing active | Bullish |
| PE | ↑ | ↓ | PE Short Covering | Put writers exiting | Bullish |
| PE | ↓ | ↓ | PE Long Unwinding | Put buyers exiting | Bearish |
Tip: You want CE/PE signals that support your Step-1 futures bias. If they contradict, skip or reduce size.
Combined Strategy – Step 1 + Step 2 = Your Trade
Use this table to tie both steps into a single, actionable decision.
| Step 1: Futures | Step 2: Options Confirmation (near ATM, 5–10 strikes) | Signal Strength | Your Trade Plan |
|---|---|---|---|
| Long Build-up | CE Long Build-up and/or CE Short Covering, plus PE Short Build-up/Short Covering | Strong Bullish | Buy CE near supports; trail stop after entry |
| Short Covering | CE Long Build-up or CE Short Covering, ideally with PE Short Covering | Bullish (often fast) | Quick CE scalps; book partials fast, avoid chasing tops |
| Short Build-up | PE Long Build-up and/or CE Short Build-up/CE Long Unwinding | Strong Bearish | Buy PE near resistances; trail stop |
| Long Unwinding | PE Long Build-up + CE Short Build-up | Bearish | Buy PE; avoid fresh CE |
| Any Futures scenario | CE & PE give mixed/opposite signals | Low Quality | Skip and wait for clarity |
How to Trade (Practical Intraday Process)
- Wait 15–20 minutes after market open for OI to stabilise.
- Do Step 1: Read NIFTY Futures OI + Price → decide bias (Bullish = look for CE, Bearish = look for PE).
- Do Step 2: Check CE/PE near ATM (5–10 strikes on each side) → confirm with the patterns above.
- Entry: Enter near logical support/resistance (use previous day high/low, day’s VWAP, intraday swing levels).
- Stops: Use a premium stop (e.g., 25–40% of premium) or a price action stop (break of your level).
- Management: Once premium moves in your favour, trail stop or book partial profits.
- Exit: If the opposite OI pattern starts forming (e.g., from CE Long Build-up to CE Short Build-up), exit immediately.
What to Check Before Entering a Trade (Quick Checklist)
- Futures bias clear? (Long/Short build-up, Short covering, Long unwinding)
- Options confirmation aligns? (CE/PE OI matches the bias near ATM)
- Location good? (Entry near support for CE, near resistance for PE)
- IV not spiking against you? (On sudden IV jump, premiums inflate—avoid chasing)
- Event risk known? (Data, RBI speech, large results, policy news)
- Position sizing fixed? (Pre-decide max risk per trade/day)
Common Mistakes to Avoid
- Trading against Step 1 futures bias just because options look tempting.
- Entering mid-move after most of the move is done (poor risk-reward).
- Ignoring reversals when CE/PE patterns flip (always exit).
- Forgetting event risk (news/announcements can invert OI quickly).
- Oversizing on expiry day (moves are faster, reversals are sharper).
FAQ
Q: Is selecting 10 strikes above & below ATM better than 3–5?
A: For intraday confirmation, 5–10 strikes around ATM is ideal. It captures nearby flows without too much noise. If your platform limits to fewer strikes, focus on the nearest 3–5 around ATM.
Q: What if Futures say Bullish but Options look Bearish?
A: Skip the trade or trade very small. High-probability setups come when both steps agree.
Q: Is Short Covering always bullish?
A: It’s bullish, but often fast and short-lived. Prefer quick scalps with strict stops.
Summary: First get the direction from NIFTY Futures OI (Step 1). Then confirm with CE/PE OI near ATM (Step 2). Trade only when both steps point the same way. Manage risk tightly and exit on pattern flips.
Logic Behind These Moves
- Long Build-up: New buying positions being created. Big players expect the market to rise.
- Short Build-up: New short positions created. Traders expect market to fall.
- Short Covering: Traders closing shorts by buying back. Often triggers quick upward moves.
- Long Unwinding: Closing long positions by selling. Often causes downward pressure.
How to Trade This Strategy
- Wait for first 15–20 minutes after market open for OI to stabilize.
- Check Step 1 (Futures) for bias.
- Check Step 2 (Options) for confirmation.
- Enter trade only if both match in direction.
- Use strict stop loss — opposite scenario forming means exit immediately.
What to Look for Before Entering
- Trend in higher time frame charts (15-min, 30-min).
- Global market cues (SGX Nifty, Dow futures, etc.).
- Important news/events for the day.
- Volume confirmation with OI change.
Disclaimer
This article is for educational purposes only and is not financial advice. Trading in derivatives involves high risk. Please consult your financial advisor before making any trading decisions.
Made for quick intraday decisions. Education only; not investment advice.