How to Use Open Interest (OI) in Options Trading
Open Interest (OI) refers to the total number of outstanding options contracts (calls or puts) that have not been settled. It helps traders understand market activity, strength of trends, and support/resistance zones.
Key Observations from the Chart You Provided
Current Market Level:
- LTP (Last Traded Price) of NIFTY 50 = 25,001.15
- Put/Call Ratio (PCR) = 0.85 → Slightly Bearish (since PCR < 1)
- Current Expiry: 29-05-2025
How to Interpret the Two Charts
Total Open Interest (Shows total OI for each strike price):
- Call OI (Red) > Put OI (Green) around 25000–25300 → Indicates resistance zone.
- Put OI (Green) > Call OI (Red) at 24500 → Indicates support.
Highest OI:
- Call OI at 25000 → Strong resistance.
- Put OI at 24500 → Strong support.
Today's OI Change (Shows how OI has changed intraday):
- At 25,000, both Put and Call OI increased → Sign of consolidation/straddle zone.
- At 24,800 & 24,850, call OI dropped while put OI rose slightly → Possible shift in support.
How to Use OI Strategically
| Scenario | Meaning | Action |
|---|---|---|
| High Put OI at lower strikes | Support zone | Consider Bullish strategies (e.g. Put spread, Bull Call spread) |
| High Call OI at higher strikes | Resistance zone | Consider Bearish strategies (e.g. Call spread, Bear Put spread) |
| Sudden OI buildup | New trend forming | Watch closely for breakouts |
| OI increasing + Price increasing | Long buildup | Bullish confirmation |
| OI increasing + Price decreasing | Short buildup | Bearish confirmation |