How To Read Option Chain Open Interest Data Like a PRO?
How To Read Option Chain Open Interest Data Like a PRO?
Option Chain Open Interest Data is highly significant information and if you know how to analyse and use it, it can give you a clear edge while trading.
Let’s see in detail about the Significance of Open Interest Data.
How to find Resistance of a Stock using OI data?
Since the majority of money traded in stock market is involved in Option trading, you can analyse option chain open interest to find the resistance of a stock or index.
Look for accumulation of open interest on the call side, which indicates the resistance of a stock/index is being formed at the specific strike price.
How to find Support of a Stock using OI data?
Just like resistance, you can analyse option chain open interest to find the support of a stock or index.
Look for accumulation of open interest on the put side, which indicates the support of a stock/index is being formed at the specific strike price.
How to find whether support or resistance of a stock is getting stronger or weaker using OI Data?
In addition to Open Interest data, we need to keep a tab on Change in Open Interest to find whether support or resistance of a stock is getting stronger or weaker.
If the Change in Open Interest of a strike price is increasing on the call side, it indicates resistance at that strike price is getting stronger. In case if it is negative, it indicates resistance is getting weaker.
This is applicable for Put & support as well.
How to find next move of a stock using OI Data?
There are 2 scenarios here:
Scenario 1: Max CE Strike <> Max PE Strike
- If CMP is between MAX CE Strike & Max PE Strike, price will be in range bound
- If CMP > MAX CE Strike, price will go up (Broken Resistance – Breakout is happening)
- If CMP < MAX PE Strike, price will go down (Broken Support – Breakdown is happening)
Scenario 2: Max CE Strike = Max PE Strike,
- If CMP < MAX CE/PE Strike, price will go up
- If CMP > MAX CE/PE Strike, price will go down
Note:
- Max CE Strike denotes Strike price on the call side which has highest open interest.
- Max PE Strike denotes Strike price on the put side which has highest open interest.
To know how to use these elements in detail while trading, watch our video:
Please feel free to ask if you have any queries.
11 Responses
Most tufest part of stock market and trading but really important of all to get handsome profit very well explained sir ???
Thanks for the feedback sir.!
You explained the hard to crack concept like eating an Ice-cream.. kudos sir…
Thanks for the feedback sir.!
Thank you dada
Sir,
Please provide commments on following scenario;
If CE > CMP and PE < CMP
Will CMP move up or down ?
Thanks,
Kev
Price will be range bound between CE strike and PE strike sir. It is scenario 1, item 1.
Some people say that in Intraday trade one should focus only on Change in OI and change in Premium/Price and that too only on 1 or 2 immediate OTM to find out the support and resistance. Is it correct?
That’s correct sir, but it is good to have an eye on highest OI Strikes as well.
sir,can you make or suggest a video of OI trading strategy for more better understanding…also if possible OI trading strategy with indicator…it will be really very helpful…
Hi Sir, thanks for reaching. We already have multiple OI data reading videos. Yes, we will be adding more flavors to it sooner.