Hedging or Bearish Sentiment is the biggest dilemma in the stock market. This is one of the common reasons for LOSS in the stock market. The traders are not able to find out whether put option contracts are increasing because of hedging or because of bearish sentiments.
Hedging or Bearish Sentiment can be found out only in the stocks, not in the index. Also to clarify that this catch 22 situation does not arise in case of an increase in CALL Option contracts. The reason being, it simply means that the sentiment is BULLISH.
In this video, i am highlighting the steps to identify what is the reason behind the increase in PUT Option contracts i.e. Hedging or Bearish Sentiment
1. Identify the stocks wherein the put options are increasing.
2. After that, you should check the traded value and delivery quantity of that particular stock.
Now if there is an increase in traded value and delivery quantity then it means the reason for the increase in PUT option contract is Hedging.
On the other hand, if the Traded value and delivery quantity is constant or decreasing them it implies that the sentiments are turning bearish.
