Nifty Volume profile and Open Interest analysis

nifty open interest volume profile Apr 13, 2022
Nifty, Open Interest, Volume Profile

Nifty has been dragging without any trend and giving false moves on either direction. During such scenario it is important to look at the short term supports and resistance by understanding the areas where major volumes have taken place accordingly trade Options.

The current market environment is more conducive towards options selling or forming a delta neutral strategy.

Below is the chart of Nifty volume profile:

Nifty Open Interest profile

Volume profile - Nifty Volume profile is suggesting randomly distributed volumes across the levels of 17800 to 17200. This has not taken shape of any specific profile which we will be discussing in much detail in Options Trading using Technical Analysis (OTTA) on 23rd-24th April.

For now it is important to note that randomly distributed profile is hinting towards non directional move and confusion among the participants. It seems there are equal and opposite forces acting at the same time. This means that even among the big players there is no consensus and markets are therefore moving in directionless fashion.

Open Interest Profile – We can clearly see sharp rise in 17500 both calls and puts Open Interest which is suggesting a short straddle is probably in play. Sharp rise in 17600 call and relatively lesser change at 17400 is suggesting that bulls are losing control and bears can overpower. During such scenario it is best to play neutral in options or with a hedge. One way is to bet by forming short strangle of far away strikes to safe guard against sharp moves in either direction but within a range.

In a nutshell, by using these simple methods of analysis one can clearly form option strategy unless there is consensus among big players and market finds the direction. 17200 – 17800 is a range and strikes should be selected further away to form strangle.

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