Trading based on Open Interest

[DaC0nsumeR]

Lately I've come across a few different trading strategies that are based on monitoring Open Interest and connecting it to liquidations.

Anybody else do this who can explain, comments, provide tips, etc.?

[slaman29]

Don't take my words for advice but I think Options expiry seems to be the even bigger trading signal.

In the most simple way I can explain is this: options expire on a certain date, no matter what the price is, and the price on these contracts are fixed, let's say Price A. Meanwhile, actual price is of course never Price A, since contracts expire in future. Lets call this Price B. Price B will always "rush" towards Price A when options expire. It seems:)

[DaC0nsumeR]

Don't take my words for advice but I think Options expiry seems to be the even bigger trading signal.

In the most simple way I can explain is this: options expire on a certain date, no matter what the price is, and the price on these contracts are fixed, let's say Price A. Meanwhile, actual price is of course never Price A, since contracts expire in future. Lets call this Price B. Price B will always "rush" towards Price A when options expire. It seems:)

Thanks for the tip! I appreciate it and am going to investigate further.

[Bitcoin_Arena]

Don't take my words for advice but I think Options expiry seems to be the even bigger trading signal.

But he's specifically asking about Open Interest and not Options


OP, Open interest is the total number of contracts in open positions in a market  at a given time. With the help of trading volume Open Interest can be used to help predict a bullish trend, bearish trend or change of trend of the market

Here is a summary from investopedia

General Rules for Volume and Open Interest





More details for better understanding:
1. https://www.investopedia.com/articles/technical/02/112002.asp
2. www.elearnmarkets.com/blog/open-interest-analysis-stock-market-trends/

[slaman29]

Don't take my words for advice but I think Options expiry seems to be the even bigger trading signal.

But he's specifically asking about Open Interest and not Options

I know, and he knows, as you can see from the response he gave:) I was merely offering him what I thought was a better signal. Open Interest is just an indication and does not produce consistent results (since can also be manipulated). But options are less manipulable because are only regulated, and almost always works to the dime.

[MrcMrc]

I base my trading analysis on volume and liquidity within a period under review; I take mostly 24 to 72 hours of trading liquidity to judge the price spike.
This formula has helped me over a long period of my trading time and has made a great trading decision.

[GreatArkansas]

Yeah, open interest is also important in trading. You can treat it as just another indicator in your chart.
This will help you to help the volume strength, market structure, etc.

I found this before on Twitter, there's a thread by @EmperorBTC that talks about open interest, on why it is important to consider when you are trading.
https://twitter.com/EmperorBTC/status/1306663011495497729

[iram3130]

Being a USDT lender, open interest is very much important for me. It definitely depicts the market trend and where it is heading. The liquidity can also be measured with it. I use this data to trade in futures as this can be a technical advantage and can increase your profit-making percentage a little high.

[DaC0nsumeR]

Great responses, thanks for the help, everybody!