dear bipin, pramanik,
u have got point 1 right
point 2 was something different :
let's take today's example (i will use today's eod data of nifty to explain)
top selling option = 4800pe (no. of contracts sold = 321181)
runner up (only opposite option) = 5000ce (no. of contracts sold = 297354)
here, since top selling option is a put, i would interpret it as an indication of "upward bias" and hence find points to buy. i will by and large, try to find opportunities to buy on dips.
and since the number of contracts sold of the runner-up enemy option (in this case 5000CE is runner up by not-too-small margin i will consider the upward bias interpretation of mine as reasonably ok.
had this difference in the number of contracts traded been more, the upward bias would have been stronger.
but please note that this is a crude (though logical and reliable) method to day trade. i used to use this but not now ( i have other guns to trigger). please don't use blindly. recently one of my friends shared a similar idea and this reminded me of all this. i thought of sharing with everyone.
picking the right entry point is critical after having got the direction of the wind.
also, pl keep in mind that since the data is only for the day (http://www.nifty50options.blogspot.com/ , http://www.nseindia.com/content/fo/MostActiveContractsOPTIDXBANKNIFTY.htm) the interpretation would be for that very day only.
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