How to trade Nifty with Volume profile and Open Interest?

How to trade Nifty with Volume profile and Open Interest?

Nifty volume profile is used to infer Big player activity which can be used across all time frame. Traders can use this analysis for taking Intraday and Positional trades.

Options Trading with Open Interest and Volume profile is one of the classic ways to trade.

Nifty Futures Hourly chart with Volume Profile analysis

Nifty Hourly chart with Open Interest analysis:

Options Trading requires understanding of momentum, trend, time to expiry and range.

Volume Profile chart shows that there is big players activity near 24500 (fut) levels. Prices are currently trading above Volume point of control (VOC) which is the highest volume node indicating exact level where positions are created by big players. For now, a decisive break below it i.e. near 24500 levels can lead to a panic selling.

Open interest - showcases the total number of outstanding contracts for a specific stock/index at any given time. On the above chart we can see that 24800 followed by 25000 has highest call build up and on the downside 24500 has highest put buildup suggesting range bound action.

Open interest and Volume profile are both indicating similar outcome and shows areas where big players are creating their positions. This is behind the scene analysis and gives the much-needed conviction for trend identification and reversal areas.

In nutshell, Nifty is expected to remain in a range of 24460-25100 levels. In such scenario buying naked option won’t work due to IV spike. So, one should create strangle to get advantage of the range bound action.

So, by combining big players activity seen from Open interest profile, Volume profile along with Simple price action one can form clear trading strategy which is must for trader to derive stop, targets and favorable risk reward.

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