*

Opt
ionChai
nAnal
ysi
swi
thExampl
es*

Opt
ionChai
nAnal
ysi
sinTr
adi
ng

I
nthisar
ti
cle,Iam goi
ngtodiscusstheOpt i
onChai nAnal
ysi
sinTradi
ng.Attheend
oft
hisar
ticl
e,youwill
underst
andthef ol
l
owi ngpointer
sindet
ailwhi
charerelatedt
o
Opt
ionChainAnalysi
s.Doj
oinmytel
egram channel
t.me/mwgl
obalt
ogetmarkett
ips,
newsandupdat
esf
orf
ree

1.Whati
sopeni nterest?
2.Howtostudyopt i
onchaintable
3.Theel
ementoft heopt i
onchaintable
4.Howtointer
pretopt i
onopeninterest
5.Useofopeninterest

Mar
ketSt
ruct
urePr
inci
ples

Pr
icemoveswi t
hinastr
ucturalf
rameworkoft
hesupplyanddemandzone.A
br
eakoutofthestr
uctur
alfr
amewor ksuppl
yanddemandzonewill
leadt
oprice
movementinthenextareaofthefr
ameworkofthesuppl
yanddemandzone

OPTI
ONCHAI
NCOMPONENT
WHATar
eITM (INTHEMONEY)OPTIONS?

1.Acall
opti
oni
ssaidtobei
nITM i
fthestri
kepri
cei
slessthanthecurr
entspot
pr
iceoft
hesecur
it
y.
2.Aputopt
ioni
ssaidtobeI
TM i
fthestr
ikepri
ceismorethanthecur
rentspot
pr
iceoft
hesecur
it
y.

WHATar
eATM (ATTHEMONEY)OPTIONS?

1.Acall
opti
oni
ssaidtobeinATM i
fthestr
ikepri
ceisequalt
othecurr
entspot
pr
iceoft
hesecur
it
y.
2.Aputopt
ioni
ssaidtobeATM i
fthestr
ikepri
ceisequalt
othecurr
entspot
pr
iceoft
hesecur
it
y.

WHATar
eOTM (OUTOFTHEMONEY)OPTIONS?

1.Acallopti
oni
ssaidtobeinOTM i
fthestr
ikepri
cei
smorethant
hecurrent
spotpri
ceofthesecur
it
y.
2.Aputoptioni
ssaidtobeOTM i
fthestr
ikepri
ceisl
esst
othecur
rentspot
pri
ceofthesecur
ity
.

Openi
nter
est

HowChangesi
nOpenI
nter
estOccur

 I
fbothpar ti
cipant
sintradeareinitiati
nganewposi t
ion,theopeni nt
erestwil
l
i
ncrease.Ifbothparti
cipantsareliquidat
inganoldposit
ion,theopeni nt
erest
wil
ldecline.
 I
f,howev er,
onepar t
ici
pantisinit
iatinganewt r
adewhi l
et heotheris
l
iqui
datinganol dtr
ade, openint
erestwi l
l r
emai
nunchanged.
Mi
sconcept
ionaboutopeni
nter
est

Neverthi
nkthatsi
ncePRICEisri
sing,
mor eLONGSarebei
ngcr
eatedthanSHORTS.
LONGSwi l
lalwaysbeequalt
oSHORTSj ustt
hatLONGSar
edominati
ngSHORTSin
thetr
ansact
ion,t
hati
swhyPRI CEisri
sing

Thenumberofshar esboughti sALWAYSEQUALt ot henumberofshar essold.Then

whyPRICEr i
sesorf all
s?becauseofbuy i
ngpr essureorselli
ngpr essure.So,i
f
buyer
sofacont ractaredominatingthesell
ers,PRICEwi ll
riseandi fsell
ersare
dominati
ngthebuy ers,PRI
CEwi llf
all
.ButBUYERSwi ll
alway sbeequal t
oSELLERS.
So,openint
erestisrisi
ng,whichmeansnewcont r
actsarebei ngadded.Butsi nce
PRI
CEi sri
si
ngwi thit,i
tmeanst hatLONGSar eDOMI NATINGt hetransacti
ons.Thus,
market/
shareisSTRONGLYBULLI SH.Oppositeforbearishtrend

WRI
TING/
Sel
l
ing(
Sel
l
ers)i
smor
eimpor
tanther
e….
.Why
…?

 Ittakesconvict
iontosellasther
eisUnl
imit
edr i
skandmor emoneyr equir
ed
 Sellersareusuall
ysomeonewi thBi
gmoneyl i
keBigInst
it
uti
ons
 Buy ersareusuall
yret
ailtr
adersasi
tisconveni
entwitht
helessrequired
capital
 Instit
uti
onsareusuall
yr i
ght
 Largeopt i
onopeni nt
erestmeansmassivebetagai
nstthatst
ri
keprice

Useofopeni
nter
estdat
a

 Toidenti
fysuppor
tandr
esist
ance
 Tofindoutwhensuppor
tresi
stancewi
l
lbr
eak
 Di
recti
onoftrend

I
dent
if
yingSuppor
tandResi
stancebasedonopt
ionchai
nopeni
nter
est
Howt
oident
if
ysuppor
tandr
esi
stancel
evel
orzone?

 STEP1findthehighestOIcolumnonbot hsi
des(cal
landputside)
 STEP2notet hecorrespondi
ngchangeinOI
 SUPPORT( PE)biggestopenint
erestnumber+posit
ivechangeinopen
i
nter
est
 RESI
STANCE( CE)biggestopeninter
estnumber+positi
vechangeinopen
i
nter
est

Howt
oknowwher
eist
her
esi
stancei
nanal
l
-ti
mehi
ghpr
ice?

 Byanal
yzi
ngt
heopt
ionchai
ndat
a

PARTI
CULARSTRI
KEPRI
CEi
nOpt
ionChai
nAnal
ysi
s

Nowwewi
l
lst
udywhati
sapar
ti
cul
arst
ri
kepr
iceshowi
ngus?
CALLS PUTS

 +vechangei nOIi mpliest hatcal

l  +vechangei nOIi mpliest hatput
writ
ersaresel l
i
ngbecauset hey writ
er saresell
i
ngbecauset hey
feelt
hest ockwi l
lnotr i
seabov e feelthestockwi l
lnotf all
bel owthe
therespecti
v el
evel respectiv
elevel
 -
v echangei nOIimpliest hatcall  -
v echangei nOIimpliest hatput
writ
ersaresquar i
ngupbecause writ
er saresquari
ngupbecause
theyfeelt
hest ockwill r
iseabov e theyfeelthestockwill fal
l below
therespecti
v el
evel therespectivel
evel

“
STRI
KEPRI
CE”wi
l
lshowanyoft
hef
oll
owi
ng:

1.LONGBUILDUP
2.LONGLI
QUI DATI
ON
3.SHORTBUILDUP
4.SHORTCOVERING

LONGBUI
LDUPi
nOpt
ionChai
nAnal
ysi
s

I
fPRICEi
srisi
ngandopeni
nter
esti
sri
sing,
itmeanst
hemar
keti
sSTRONGLY
BULLI
SH.LONGBUILDUP

 IfPRI
CEandOIbot har
eri
sing,itmeanst
hatthenewcontr
actthati
sbei
ng
addedisdominat
edbybul
ls,that’
swhyPRICEisri
singwi
theverynew
contr
actaddi
ti
on.

Shor
t-
cov
eri
ngi
nOpt
ionChai
nAnal
ysi
s

I
fPRICEi
srisi
ngbutopeni
nter
esti
sfal
l
ing,
itmeanst
hemar
keti
sWEAKLY
BULLI
SH.Shortcov
eri
ng

 IfPRI CEisri
singbutopeni nter
estisfall
ing,itmeansthatther i
sei npr i
ceis
duet oSHORTCOVERI NGandnotbul l
ishness.Seewhyi sOIf all
i
ng?I t’
sf al
li
ng
becauseposi t
ionsar ebeingsquaredof fandt henumberofopencont ractsi
n
themar keti
sr educing.ButsincePRICEi sri
si ngwit
hit,i
tmeanst hatSHORTS
ar eSQUARI NGOFFanddomi nati
ngLONGSi nthetr
ansaction.See,howwoul d
SHORTSsquar eof f
?Theywi llsquareoffbyBUYI NG.Thati swhyPRI CEi s
rising.So,PRICEi snotrisi
ngbecauseLONGSar edominating.I
tisr i
sing
becauseSHORTSar edomi nati
ngthesquar ingoffprocess.Thus, i
tcannotbe
cal l
edBULLI SH.ItisWEAKLYBULLI SH.I tcanbeaTRAPf ornewLONGS.

 Ral
l
yExt
rapol
ati
ngf
rom t
hegener
alr
ule,
pri
ceupwi
thhi
ghv
olumei
sbul
l
ish.
 Howev er,i
fopeni nterestdropsduri
ngt hissametradingsession,abearish
readi
ngoft hatvariableresult
s.Theinternalcondi
ti
onoft hemar ketduri
ng
suchat radi
ngsessi onwoul dbethatofshor tcoveri
ng.Ashor t-
coveri
ngr al
ly
i
sav eryweakt echni calsi
tuati
on.Thet echni
ciancanstatethatthedeclinein
openinteresti
smor ebear i
shthanthehi ghvolumeisbull
ish.Infact,i
fthe
volumeissohi ght hatitcanbeconsi deredtobeofblowof fproport
ion,the
volumereadingwoul dalsobebear i
sh-signal
ingatl
eastat empor ar
yreversal
ofthepriceuptrend

SHORTBUI
LDUPi
nOpt
ionChai
nAnal
ysi
s

I
fPRI
CEi
sfal
l
ing,
openi
nter
esti
sri
sing,
themar
keti
sSTRONGLYBEARI
SH.

 Ift
hepri
ceisf al
l
ingandopeni nteresti
sr i
sing,itmeansthatSHORTSar e
dominat
ingtheLONGS.Andsi nceopeni nterestisri
sing,
itmeansthatnew
contr
act
sarebei ngadded.But,sincethepr i
cei sfal
l
ing,i
tmeansthenew
contr
act
swhi charebeingaddedar edomi nat edbySHORTS, notLONGS.
Hence,i
tisSTRONGLYBEARI SH.

LONGLI
QUI
DATI
ONi
nOpt
ionChai
nAnal
ysi
s

I
fPRI
CEi
sfal
l
ingandopeni
nter
esti
sfal
l
ing,
themar
keti
sWEAKLYBEARI
SH.

 I
fPRI CEisfall
ingandopeni nter
estisfal
ling,itmeanst hatthefal
li
npriceis
duetoLONGCOVERI NGoral socall
edLONGUNWI NDING.Seewhyi sopen
i
nterestfall
i
ng?I t
’sfall
ingbecauseposi t
ionsar ebeingsquar edof
fandt he
numberofopencont r
actsinthemar ketisreducing.ButsincePRICEisf al
l
ing
wit
hi t
,itmeanst hatLONGSar eSQUARI NGOFF&domi nati
ngSHORTSi nthe
tr
ansact i
on.howwoul dLONGSsquar eoff?Theywi llsquareoffbySELLING.
ThatiswhyPRI CEisfalli
ng.So,PRICEisnotf alli
ngbecauseSHORTSar e
dominat i
ngandcr eati
ngnewposi t
ions.I
ti sfall
i
ngbecauseLONGSar e
dominat i
ngthesquar i
ngof fprocess.Thus, i
tcannotbecal ledBEARISH.Itis
WEAKLYBEARI SH.ItcanbeaTRAPf ornewSHORTS.

MARKETDI
RECTI
ONBASEDONOPTI
ONOI

 I
nwhichdir
ecti
onbothsuppor
tandr
esi
stancear
eshi
ft
ing.i
fbot
hshi
ft
ings
hi
gheri
sindi
catebul
l
ishl
y

HOW TOKNOW?
  BYCHANGEI
NOPENI
NTERESTI
NPARTI
CULARSTRI
KEPRI
CE

Let
’sst
udycal
lopeni
nter
est(
CEOI
)

Let
’sdi
scussputopeni
nter
est(
PEOI
)
Let
’scombi
nebot
hcal
l
sandput

 Cal
lwri
teraddi
ng(i
ncreasing)andputwr it
erexi
ti
ng(decreasing) =beari
sh
 Putbuy
ersadding(
increasing)andcallbuyer
sexit
ing(decreasing)=bear ish
 Cal
lwri
terdecr
easi
ng(exiti
ng) andputwrit
eraddi
ng(increasing)=bulli
sh.
 Cal
lbuyer
sincr
easing(adding)andputbuy er
sdecreasing( exi
ting) =bul
li
sh
OPTI
ONCHAI
NTABLEFORABOVECHART

WHATHAPPENNEXT

Let
’sseet
heopt
ionchai
ndat
afort
hischar
t
BREAKOUT/
REVERSAL

Let
’sst
udybul
l
ishbr
eakoutand

Bul
ltobearr
ever
sal

REVERSALSTUDY

 I
fnearCEOTM st ri
kepri
cehasthehighestopeni nterestandposi
ti
vechange
i
nopeni nt
erest
,thent
hepri
cewi l
lnotbreakthatlev el
.meanscallwri
ter
sfeel
thatpr
icewil
lnotmoveabovethatlevel
 PUTWRI TERexiti
ngmeansopeninterestdecreasinginATM andITM PE,
THEYFEELTHAPRI CEWILLMOVEBELOW THATLEVEL

BREAKOUTSTUDY

 I
fnearCEOTM stri
kepri
cehaschangedi
nnegati
veopenint
erest
,thenthe
pr
icewil
lbr
eakthatl
evel
.call
wri
teri
sexi
ti
ngmeanstheyarefeel
ingpri
cewil
l
moveup
 Addi
ti
oninATM ANDI TM PEmeansputwri
ter
sarebul
li
sh
PutCal
lRat
io(
PCR)
HI
GHPCR=BULLI
SH

 Moreputst
hancall
s
 Bi
gsell
ersar
esell
i
ngputs,moret
hancall
s
 Thi
smeanstheyaresay
ingthemarketwon’
tgodownmuch

Here,i
nthisarti
cl
e,It
ri
edt
oexplaintheOpt
ionChai
nAnalysisi
nTradi
ng.Ihopeyou
enj
oythisOptionChai
nAnalysi
s.Dojoi
nmyt el
egr
am channelt
.me/mwglobalt
oget
marketti
ps,newsandupdatesforfr
ee

HappyTr
adi
ng