F&O stocks: Hindustan Aeronautics, Power Grid among 5 stocks with short buildup
To determine if a stock has seen a buildup of fresh short positions, we need to understand the concept of "short selling." Short selling occurs when a trader anticipates that the price of a stock will decrease. The trader sells the stock without actually owning it and then aims to buy it back at a lower price. For example, if stock XYZ is trading at Rs 100, a trader might sell it at Rs 100 and then repurchase it at Rs 90, thereby making a profit of Rs 10.
In Wednesday's , the following five stocks witnessed a build of fresh short positions. Let us first understand how this conclusion is reached whether the stock has seen a buildup of fresh short position or not. To understand it we have to look at what “ short selling” means. When a is expecting the stock prices to fall, he may sell the stock without owning that and buy at a lower price, for example, stock XYZ is trading at 100, a trader sells the stocks at Rs 100 and buys it back at Rs 90. He made a profit of Rs 10. Selling the stocks without owing the underlying stock is called .Coming to the buildup of fresh short positions, When the stock prices move downward and on the counter increases, it is taken as a sign of a . The signal is considered more reliable if the volume on the counter has also seen an increase as the declines.
dropped by 2.44%, and the open interest saw an increase of 7%.
fell 2.3%, and open interest saw an increase of 10.97%.
L&T declined by 2.3%, and open interest saw a rise of 11.88%.
price fell by 1.96%, and open interest saw a rise of 14.01%.
dropped by 1.5%, and the open interest saw an increase of 6.38%.
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Some additional checks would help traders make better trading decisions as they increase the probability of a follow-up of the upward movement in the stock price.
First, if this long build-up is accompanied by any bearish crossover, which means that whether in the current down move when the open interest has moved up the stock price has moved below its 20, 50 or 100-day . Another couple of points that traders should keep in mind when taking a trade by looking at the matrix of build-up of short positions on the basis of open interest. Also check whether there is any extraordinary build-up of in any out-of-money , especially any far-of-the-money out option. That indicates the probability of any informed person taking exposure through options for any possible downside.
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Source: Stocks-Markets-Economic Times
