Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
How do YOU use Options Open Interest to Make Trading Decisions?
Today I decided to conduct a study in open interest and the results are intriguing.
Test period: 1/6/20-3/13/20 (encompasses a wide range of market conditions/volatility.)
Instrument: SPX
Protocol: Identify the strike in the nearest expiration with the highest cumulative put and call open interest. Record next day close-to-close percent change in SPX.
Results: Up until 2/21 the results favored trading away from the strike with the greatest open interest, but once volatility exploded the results began to strongly favor trading towards this strike. Another interesting observation: throughout the entire test period Monday and Friday displayed the highest likelihood to trade towards the strike with the most open interest.
I must confess that I tend to fixate on the strikes with OI for the reason that the spread is often doable.
Recently I have also developed a degenerate fetish for abnormal interest strikes very far out of the money. Recent champ in this regard is esp. the TSLA JAN 2020 5, which sometimes has a decently narrow spread.
"Persistence is very important. You should not give up unless you are forced to give up." -- Elon Musk