Even if you could discern whether the options were bot or sold, what good would it do you? One could buy calls if bullish. One could also buy calls to hedge short stock (bearish).
The reason.. is that one can assume that if there is HUGE volumes of calls being purchased.. versus the open interest.. then maybe there is news that the 'layman' is unaware of.. Institutions are often much more aware of inside information (not necessarily illegal.. just depth) than some retail guy. Some traders tag along for super high volumes bought on the offer (i.e. calls that are bought.. and not sold) If your familiar with Jon Najarian and his brother peter from FastMoney.. they do this The most information you can get the better.. make sense?
It is always both. If something is bought then that means someone sold it. If something is sold then that means someone bought it. If an item changes hands for money then it was BOTH bought and sold by opposing parties. However I assume you might be talking about the Open Interest of an option. If so, the answer is: if you buy a contract from someone that is selling one to enter a position AND you are buying to enter a position then yes it goes up by one. If you buy from someone that had already bought and is closing a position and you are opening a position then it stays the same. If you are buying to close from someone selling to close then it goes down by one. You never know when you buy which will happen.
this is in-correct. there is not always a buyer and a seller of options. when there are (for instance) more buyers than sellers on a particular option then the options exchange is obligated to act as a market maker and they will buy the option (if we're selling) or they will sell the option (if we are buying).
I am pretty sure that the first part and the third part is incorrect.. the 2nd part is correct.. here is the breakdown #1 -INCORRECT "if you buy a contract from someone that is selling one to enter a position AND you are buying to enter a position then yes it goes up by one" -if someone sells to open.. that equals +1 to open interest -if you buy to enter a postion.. that equals +1 to open interest -the total is +2 to open interest. #2 - CORRECT "If you buy from someone that had already bought and is closing a position and you are opening a position then it stays the same" -if that 'someone' closes their position.. then that is a -1 to open interest -if you buy to open a contract. that is +1 to open interest. -this scenario would make no change to open interest. you are correct with this one #3 - If you are buying to close from someone selling to close then it goes down by one. You never know when you buy which will happen. - if you are buying to close.. open interest will be -1 as a result -if someone is selling to close.. then open interest will be -1 as a result -open interest will be -2 as a result of your third scenario.. not flat (0) again.. like I noted in my first response (I had little time to spell this out.. now I do).. the options exchange will act as a market maker when buyers and sellers do not line up equally. this provides liquidity in the market and assures people that they will always be able to open or close their contracts. this is the way it works. not like you described. If you think I'm incorrect about any of this.. please correct me.. I'm learning like most of us. I"m pretty sure I'm right. I got that information from multiple sources and from people who do this successfully for a living.
they do not line up equally. when buyers and sellers do not line up then the option exchange serves as a market maker and they take the opposing end of the deal, whatever that may be
Just to clarify something.. there is much more to this type of thing than just simply following volume. But it IS something to note at least.
not sure about options but for futures you can look at FIX message aggressor tag and tickdirection tag
I am pretty sure that the first part and the third part is incorrect.. the 2nd part is correct.. here is the breakdown #1 -INCORRECT "if you buy a contract from someone that is selling one to enter a position AND you are buying to enter a position then yes it goes up by one" -if someone sells to open.. that equals +1 to open interest -if you buy to enter a postion.. that equals +1 to open interest -the total is +2 to open interest. #2 - CORRECT "If you buy from someone that had already bought and is closing a position and you are opening a position then it stays the same" -if that 'someone' closes their position.. then that is a -1 to open interest -if you buy to open a contract. that is +1 to open interest. -this scenario would make no change to open interest. you are correct with this one #3 - If you are buying to close from someone selling to close then it goes down by one. You never know when you buy which will happen. - if you are buying to close.. open interest will be -1 as a result -if someone is selling to close.. then open interest will be -1 as a result -open interest will be -2 as a result of your third scenario.. not flat (0) again.. like I noted in my first response (I had little time to spell this out.. now I do).. the options exchange will act as a market maker when buyers and sellers do not line up equally. this provides liquidity in the market and assures people that they will always be able to open or close their contracts. this is the way it works. not like you described. If you think I'm incorrect about any of this.. please correct me.. I'm learning like most of us. I"m pretty sure I'm right. I got that information from multiple sources and from people who do this successfully for a living.
Each contract has a buyer and a seller so you always need to look at both sides to determine what happens to open interest. So: 1. If you buy-to-open and the person on the other side sells-to-open then open interest increases by 1 contract. 2. If you buy-to-open and the person on the other side sells-to-close or vice versa, then open interest doesn't change. 3. If you buy-to-close and the person on the other side sells-to-close then open interest decreases by 1. In other words, if both parties open then OI is +1. If both parties close then OI -1. If one opens and the other closes then it's no change.