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The market provides valuable insights by revealing the highest price levels, the time those levels were reached, and the amount of open interest at that peak. Traders can analyze these points to determine how far the market has moved from its peak or valley, giving them a strategic edge. For example, if a market low is observed at 12:30 PM and open interest continues to build up, it indicates that money is flowing into specific options, making them stable.
what is Orderflow - https://vtrender.com/posts/what-is-exactly-the-orderflow
We did a live session covering key concepts required by traders to trade the derivative markets of today . A full recording is at - https://x.com/Vtrender/status/1892537385008922737
A YouTube recording is at - https://youtu.be/gvF5N8cXHfA
The session covers critical concepts in the options market, including VWAP (Volume Weighted Average Price) and VPOC (Volume Point of Control). VPOC represents the price level where the highest volume is concentrated on a volume profile chart. Traditional traders analyze volume below price bars, whereas Vtrender focuses on volume next to the price bar, and Volume inside a Price bar, providing a more accurate representation of market activity.
The option chain in Vtrender's charting platform- charts.vtrender.com, provides all relevant data in one table. The left side lists calls, the middle column shows strike prices, and the right side lists puts. Each side includes information on open interest, maximum open interest, and daily changes in OI and volume.
A crucial aspect of market analysis is determining whether an option is being written or accumulated. When the latest price is below VWAP and POC, it suggests option writing (a bearish sign). Conversely, if prices are above VWAP and POC, the market might experience short-covering, indicating a potential upward move.
Gamma zero is an essential reference point in options trading. At the market open, gamma zero was at 23,000, but a gap-down opening shifted it to 22,900. Observing this shift, traders can determine how the options market is developing. On settlement days, most options volume comes from writers managing their positions to ensure price stability within a specific range.
At the first 30-minute mark, the highest volume in calls was seen at 22,900 and 23,000, while the highest volume in puts was at 22,900, 22,850, and 22,800. This pattern indicated that option writers were setting up a narrow range, making 22,900 a key gamma level. All charts are discussed in the video
To analyze market behavior, traders can open a straddle chart for a specific strike price. For example, 22,900 was identified as the gamma zero, and equal volumes in call and put writing suggested range-bound trading. This data can help traders decide whether to take short positions in the straddle.
Traders also use strangle charts, which involve selecting two different strike prices for calls and puts. For instance, a conservative trader might choose 22,800 for puts and 23,000 for calls. Once selected, the strangle chart provides insights into whether the market is likely to stay within the range or break out.
An example of how to make straddle and strangle charts is in the video
The candlestick and order flow charts provide a deeper understanding of how an option is being traded. When an option trades below VWAP and POC, it signals active option writing. By combining market profile charts, line charts, and order flow analysis, traders can identify profitable shorting opportunities.
For instance, when open interest consistently increases and the COT (Cumulative Orderflow Tracker) is negative (red), it indicates aggressive selling. Conversely, if an option price moves above VWAP with increasing open interest, short-covering or buying pressure is taking place.
The A to Z of MarketProfile and Orderflow - https://vtrender.com/posts/the-az-of-market-profile-order-flow-a-traders-glossary
Market profile concepts can be applied to higher time frames to track price behavior over weeks. By analyzing weekly profiles, traders can identify value areas, POCs, and VWAP levels to determine whether an option is trending or forming a balanced range.
For example, if a call option is forming overlapping value areas with a POC shifting lower, it suggests that upside movement is limited, and writing that option could be a profitable strategy. By referencing weekly VWAP levels, traders can set precise stop-loss points for option positions.
On expiry days, option volumes are highest, and traders can see activity in multiple strike prices, which might not be active on other days. However, option writing still occurs on non-expiry days, and traders must track where the highest volumes are concentrated to determine gamma zero levels and potential price ranges.
The key to profitable option writing is identifying strikes where VWAP and POC are aligned for stable premium decay. Conversely, if an option crosses above VWAP, it can signal an upcoming squeeze against the writers.
Order flow charts help confirm writing activity by tracking COT, open interest, and price behavior near VWAP. For example:
If OI increases while COT is red, it indicates strong writing activity.
If VWAP is reclaimed after writing, there is a risk of short-covering and price expansion.
By monitoring large red sell volumes near VWAP, traders can confirm sustained bearish pressure in an option.
By integrating market profile, order flow, gamma levels, and option table analysis, traders can make informed decisions on straddle, strangle, and individual strike trades. Understanding where writing activity is concentrated and how VWAP interacts with open interest is crucial for maximizing profits, especially on settlement days.
Using Vtrender's tools, traders can monitor live volume shifts, set up well-structured risk-reward trades, and develop strategic entries and exits based on institutional behavior.
The charts used in the video are at - charts.vtrender.com
A quick overview of the concepts is in our 12 video Ecourse . Immediate access is at - https://vtrender.com/ecourse
If you need a live hand holding in market hours and a full undertanding of all chart concepts look up the VLD - https://vtrender.com/mentorship
Markets don't move because indicators change.
Indicators change because markets move.
A practical reference for NSE & BSE derivatives traders. 366 pages, built to sit open beside live charts.