Nifty Volume Profile and Open Interest Analysis
Apr 10, 2023
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Nifty has been trending on upside post it broke above 17060 without any dips or pullback.
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 buy on dips for good risk reward trade setup or to form Options Strategies rather than buying plain options.
Nifty Open Interest profile
Below is the chart of Nifty volume profile:
Volume profile - Nifty Volume profile is suggesting concentrated volumes near 17920 (futures) which is the highest volume area. This has taken shape of D shaped profile which indicates balanced approach by traders from medium term perspective. We will be discussing in much detail in Options Trading using Technical Analysis (OTTA) on 15th – 16th April 2023.
For now it is important to note that high POC near 17920 is indicating hurdle near this level which Bulls have to capture to extend this trend further. Major accumulation has taken place near the zone of 17000 – 17200 levels shown in blue shaded area.
Open Interest Profile – We can clearly see sharp rise in 17500 puts Open Interest which is suggesting traders are still committing for rally to continue despite of sharp rise. Sharp rise in 17700 call is suggesting that upside momentum can be slower. During such scenario it is best to sell puts with hedge and keep riding the trend on upside.
In a nutshell, by using these simple methods of analysis one can clearly form option strategy in direction of big players by looking at Open interest profile and volume profile. It is also crucial to know strike price selection to make the most of the trending move.
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