Navigating the Open Interest of Options on 6/15: SoFi Stock Has Doubled. Wait for a Better Entry Point, Analyst Says
As the open interest change for $SoFi Technologies(SOFI.US$ soared by 28,803 contracts, the largest increase of the day, traders became more bullish on the stock.
The open interest of call options for $Coca-Cola(KO.US$ dropped by 27,356 contracts today, the second largest fall in the market. This caused the overall open interest of the stock to decline as well.
The OI PCR of $Archer Daniels Midland(ADM.US$ surged by 50.1% to 1.11 today, the highest increase in the market.
The OI PCR of $Xcel Energy(XEL.US$ dropped by 28.4% to 0.32 today, the largest fall in the market. This indicates that the sentiment in the stock has become more positive than the previous day.
What is Open Interest Put Call Ratio? An indicator to help with market sentiment analysis within specific time-frames.
OI PCR can be used to determine market sentiment -- if it is greater than 1, it is considered bullish, and if it is lower than 1, it is considered bearish. And computed by total open interest of all the puts divided by total open interest of all the calls.
Its utility, however, goes beyond this simple interpretation. The OI PCR can be used to determine market sentiment. If the OI PCR is greater than 1, it is considered bullish, and if it is lower than 1, it is considered bearish. However, its utility goes beyond this simple interpretation. The indicator can detect the dangerous consensus we discussed earlier, which can lead to drastic price movements.
To provide context, when the OI PCR goes significantly above 1, it indicates a shift from a bullish sentiment to an extremely bullish sentiment. Similarly, if the OI PCR is close to 0, it suggests an extremely bearish mood.
Disclaimer:
Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Option before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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