OI build-up explained: long build-up, short build-up, short covering and long unwinding
Open interest tells you positions exist. The change in OI together with the change in price tells you what kind of positions are being added or removed. There are only four cases.
| Price | OI | Tag | Meaning |
|---|---|---|---|
| up | up | long build-up | fresh buying |
| down | up | short build-up | fresh writing |
| up | down | short covering | writers squeezed out |
| down | down | long unwinding | buyers giving up |
Calls and puts read differently
Short build-up in a call above spot is call writing: supply, a ceiling. Short build-up in a put below spot is put writing: support, a floor. Short covering in calls is bullish fuel (the ceiling is being removed); short covering in puts is bearish. Long build-up in calls is bullish speculation; long build-up in puts is either hedging or a bearish bet, which is why weighting matters.
Windows
Day-level build-up (versus the previous close) tells you the big picture. Fifteen-minute build-up tells you what is happening now. A call wall that has held all day but shows short covering in the last fifteen minutes is about to be tested.
The desk read
Put the tags near the money together: call writing above and put writing below is a range; call writers covering with put writers adding is a bullish lean; the reverse is bearish. The terminal's OISCAN panel samples NIFTY, BANKNIFTY, FINNIFTY and SENSEX every three minutes and writes this sentence for you, and screens the NIFTY 50 F&O stocks on a day basis.
When the OI read and the chart's market structure agree, the setup is strong. The VIP Indicator draws the structure side of that equation.