Options Volume
1. Introduction
Options volume represents the number of contracts traded during a specific session.
It reflects trader activity, sentiment, and short-term liquidity in the options market.
Analyzing call and put volume helps identify whether traders are leaning bullish, bearish, or neutral.
2. Application
- High Call Volume: Indicates bullish speculation or hedging against short positions.
- High Put Volume: Suggests bearish sentiment or protection buying.
- Volume Spikes: Often precede volatility events or directional moves.
Traders often look for:
Put/Call Volume Ratio = Total Put Volume / Total Call Volume
Interpretation:
- Ratio < 1 → More call buying (bullish bias).
- Ratio > 1 → More put buying (bearish bias).
Combining volume trends with open interest shows whether new positions are being opened or closed, improving signal accuracy.
3. Key Takeaways
- Volume shows participation and conviction.
- Rising call volume = bullish tone; rising put volume = defensive tone.
- Use in combination with open interest and implied volatility for best context.