#optionsbreakouts

[reenajain]

Options breakouts trading strategies using "Trap Indicator"

Hey Folks,

Many indicators are effective in the market. Of course, there are more indications that are effective boosters in options trading. From the perspectives of activity and traceability, options trading open interest is crucial.

In an options trading strategy, the option with the most active trades should be chosen because it has the most open interest.

Option Open Interest = Option Buyer + Option Seller

Nonetheless, option sellers typically deal with the following:

Uncertain loss

Small profit

Margin

Risk with a negative reward

But, if the option seller is still writing the option, it demonstrates a strong belief and a methodical approach. As a result, his OI of the option is examined from the seller's perspective and aids in measuring sentiment. Find out if these option sellers at a specific strike are being trapped, one must wait

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I was able to grasp this idea and implement it more practically with the aid of a video. The Quantsapp Trap Indicator, which employs algorithmized logic to find such instances or traps in NSE equities or indices like Nifty and BankNifty, is used in the film. Quantsapp is India's premier options analytics platform.

[reenajain]

What is the significance of open interest in options trading strategies?

Open interest holds significant importance in options trading strategies as it provides crucial information about the activity and popularity of a specific options contract. By understanding the significance of open interest, options traders can make more informed decisions.

"Open interest"represents the total number of outstanding options contracts that have not been closed or exercised. It reflects the number of contracts held by market participants at any given time. Higher open interest indicates increased market participation and a larger number of active contracts. One key benefit of open interest is that it offers insights into market liquidity. When open interest is high, it suggests a more liquid market with ample buyers and sellers. This liquidity translates into tighter bid-ask spreads, allowing traders to enter and exit positions with ease and at favorable prices.

Open interest in options is looked at from option sellers’ perspective as they have more stake in the game or skin in the game. So, the study of option sellers’ behaviour, relative to underlying price movement and open interest dynamics of different strikes is of importance to understand.

Where is the highest OI call strike placed? Where is the highest OI put strike placed? Now how does the underlying moves during market hours and how these soft spots behave?

Of course, all these questions arise. Now I think the suspense should be killed by the video from where I learnt also.

[reenajain]

How can open interest in futures/options be used to identify trends in stocks or overall indexes?

Open interest in futures/options can be used as a tool to identify trends in stocks or overall indexes by analyzing the change in open interest over time.

Increasing open interest in the same direction as price movement: If the open interest in a particular futures/options contract is increasing while the price of the underlying asset is also increasing, this may indicate a bullish trend is forming. Similarly when the open interest is increasing but prices are collapsing, suggest or may indicate a bearish trend is forming.

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Now the intensity of that move is dependent on relative positioning of open interest and price in percentile terms. How did I learn this? Many don’t like to share their secrets. But I would like to mention that I learnt from this video.