Options Trading Using Bollinger Bands®, Open Interest and Time Cycles

bollinger bands open interest option trading time cycles Mar 08, 2023
Options Trading Using Bollinger Bands®, Open Interest and Time Cycles

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Options Trading requires timing the entry and exit precisely. By combining Bollinger Bands along with Time cycles and Open Interest profile we can gauge the momentum and Time.

Time cycle is amazing way to identify possible low formation and area of reversal. It can be directly applied on Options chart.

Nifty 17500 call Option 15 mins chart:

Nifty futures hourly chart Open Interest profile

Options are amazing instrument to trade but only if one can understand the momentum and Time along with it. For Option buyers, trend and Time are running against them. It is therefore important that Option buyers are able to Time the market even on Intraday basis.

Nifty 17500 Call options chart shows Time cycle of 87 period applied on 15 minutes chart. This suggest that every 87 period there is tendency to form a low and bounce back. The nature of the up move will depend on the momentum which we can gauge using Bollinger Bands.

As shown in above chart, the latest cycle resulted into prices moving from 300 to above 430 levels on 6th March 2023. During the bigger downtrend the upper end of the Bollinger Bands acted as strong resistance but on 3rd March prices broke above the upper bands and resulted into the trending move giving more than 130 points.

Next cycle is now due on 9th March 1pm. So, option buyers can start looking for buying opportunity in

Open Interest profile – Nifty open interest profile helps to understand at what level big players are building their positions. Open interest is always looked from sellers perspective as they are carrying the risk. As per above chart of OI profile we can see that 17600 is immediate support due to high put sellers active there and 17700 as immediate hurdle, move above 17720 – 17730 can result into short covering rally further on upside.

In a nutshell, by combining Time cycles on Options chart along with Bollinger Bands and Price action areas using Open Interest a complete trading system can be formed especially for Option buyers.

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