13 Responses to “Open Interest | A Sneaky Way To Measure Market Sentiment”

Comments

Read below or add a comment...

  1. excellent tip Alessio, simple things are always the best!

  2. Konrad

    do you know where I can find a similar information about call and put regarding currencies, index financial futures? Pls let me know, thnx in advance, regards Konrad

  3. Nice, thanks for sharing

  4. Jerry

    Awesome tip thanks

    Is it possible to see this for the footsie? when I put it in there’s no option chain link

    Thanks again
    J

  5. Martin

    Hello

    And don’t you, Alessio, think that such data should be rather interpreted in contrary to what they show at first glance?
    If there are ony 9k of put options bought (in case of Apple) it may mean that there are not many investors willing to underwrite them (sell them) –> they see potential for price to go down and if they sell put option then they will lose money.
    Same reason for many calls bought – many willing to sell them as they see room for lower prices and earning a premium.
    As selling an option brings risk of unlimited loss, that is the way I would analyse such data. From website of Chicago Board of Option Exchange you can obtain data on call/put ratios and simply check what is the relationship between price and cell&put optinons bought.

    Take care

  6. Thanks Martin – that is good thinking and you’re right about sometimes it pays to be contrarian. What I would say is that this “open Interest” check I describe in this article should be used alongside your technicals (and fundamentals if you like) and not by itself. All the best.

  7. Thanks Mike for your feedback on my blog post. I appreciate it.

  8. Dan

    Open interest doesn’t always mean “buy to open”. Some of those Apple call option positions could have been opened by investors selling a covered call, ie “sell to open” which would increase the open interest as well. On the other side, a market maker would buy the options, then hedge their exposure by shorting the stock in a specific ratio (“delta hedging”). It could be that people weren’t in fact outright bullish but were long the stock and wanted to collect some premium in case of a pullback or let their shares be called away.

  9. Brandon

    You do realize that the open interest for those call options could have all been purely written right? Each time someone writes a call (they expect the price of the stock to decrease) open interest is still increased by 1. So you could have had 25,000 people writing calls and expecting the price to decrease. Open interest should not be used as a means to determine the direction of the underlying stock. It is purely used to determine how liquid that particular option is. Therefore this method should not be used at all, even along side your other analysis, as it provides no value to your findings.

  10. Michael

    Thanks for sharing this wonderful strategy.

    Why are you changing the expiration date of the option to “next month” ? Is there a specific reason?

  11. Michael

    Why are you changing the expiration date of the option to “next month” ? Is there a specific reason?

  12. Umbolox

    Absolutely not.

    I quote Brandon and Dan.

    This is OPTIONS’ BASICS, go study!!

  13. Shirish

    It is all totally wrong. In fact it is just the other way round. High CALL OI means a lot more call writers are out to make money they have sold the CALLs at high premium and they would push prices down to make money by buying back at lower prices or even eat up the whole premium. Check your facts mate….