Identify big moves with Futures Volume and Options OI: Shubham Agarwal

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Highest Call OI acts arsenic upside hurdle and Highest Put OI acts arsenic downside hurdle.

July 22, 2023 / 10:15 AM IST

Future and Option

Future and Option

Shubham Agarwal

Trading enactment has ever been important for america traders successful gathering anticipation for aboriginal terms action. Two such indicators of trading enactment Volume and Open Interest (OI) tin beryllium utilized to place probable large move. Let america look astatine some to recognize the value and exertion of each 1 of them.

Futures Volume

Volume has been looked astatine arsenic a spot identifier for decades by traders. This is due to the fact that measurement means participation. More information means statement sentiment of the expectation. A determination with higher measurement has been historically sustained much than a determination with little volume.

Let america spell 1 measurement further though. What if we plotted the price-interval omniscient measurement alternatively of time-interval omniscient volume?

For Example:

So, alternatively of time omniscient volume, tin we besides not look astatine this as:


This volition present assistance america successful uncovering retired the terms intervals wherever determination was large volume. The value of this measurement identified terms tin besides beryllium looked arsenic Decisive Price. Easiest mode to work this is by comparing measurement astatine 100 implicit 101. This indicates that tons of trades took spot astir 100. This makes 100 arsenic the starting constituent of the expected determination journey.

Let america look astatine a caller illustration to marque this clearer3
The illustration supra belongs to Delta Corp. As we tin spot ~252 was Decisive Price with immense volumes traded successful and astir 250 till 11th July.

So, the starting constituent was wide present ~252. However, the absorption and the trigger are missing. Meaning, it is important to fig retired erstwhile and wherever it could move. Generally, arsenic soon arsenic the terms distances itself from the Decisive Price, it could trigger the move. To specify distances itself, we request to crook to Options Open Interest.

Options Open Interest

Historically, we person seen 2 things:

1. Highest Call OI acts arsenic upside hurdle while Highest Put OI acts arsenic downside hurdle

2. Crossover of Higher OI either Call oregon Put triggers Upside oregon Downside move

Following is the illustration of Delta Corp options OI connected 11th July. With this tin we safely accidental that trading beyond Highest Call OI of 260 oregon Lower Put OI of 240 could suffice arsenic distances itself. There by giving america not lone the clip but besides the absorption of the trigger.

What happened aft that tin explicate the interaction of High Volume successful Futures + Options OI.

5Few things to enactment present are:

1. Ensure that the Highest Volume Decisive Price has reasonably higher volumes than different prices.

2. There is simply a anticipation of mendacious alarm. So, for hazard absorption if aft breaking the highest OI onslaught level, if the terms does not prolong it is ever champion to exit and re-evaluate.

Finally, Price omniscient Volume investigation and Options Open Interest is easy disposable successful bulk of Options Analytics applications.

Disclaimer: The views and concern tips expressed by experts connected are their ain and not those of the website oregon its management. advises users to cheque with certified experts earlier taking immoderate concern decisions.

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