Option Chain Analysis: Using Open
Praveen Dubey (SEBI Registered RA)
SP RESEARCHVIA PVT. LTD. (INH000015808)
Deciphering Open Interest in Option Chains
Options trading requires analyzing where institutional traders (writers) are building positions. Option chain analysis helps identify strong intraday supports and resistances.
How to read support and resistance from Open Interest (OI)?
The strike price with the highest Call Open Interest acts as a strong resistance. The strike price with the highest Put Open Interest acts as a strong support level for expiry.
Key Metrics to Track
- Change in OI: Shows where new positions are being built during the day.
- Put-Call Ratio (PCR): PCR > 1 indicates bullishness; PCR < 0.6 indicates extremely bearish/oversold conditions.
- Implied Volatility (IV): High IV options are expensive; low IV options are cheap.
Written by Praveen Dubey
Chief Research Analyst | SEBI Reg: INH000015808
Statutory Warning & Risk Disclaimer: Investment in securities market is subject to market risks. Read all related documents carefully before investing. Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. Content provided on this blog is for informational and educational purposes only.