1/ What are options? Similar to futures, they're a form of derivatives. They can be defined as "contracts that give an investor or trader the right to buy or sell Bitcoin (but not the obligation) at a given price (strike price) and a specific date (expiration date)
2/ The strike price of an option is the price at which a put or call option can be exercised. It is also known as the exercise price
contains charts of BTC and ETH options with 2 key metrics of : volume and open interest (OI), across different platforms (Deribit being the biggest one).
4/ "Volume" refers to the number of contracts traded in a given period, and "open interest" denotes the number of contracts that are active, or not settled.
Image credit: @ChartGuys
5/ Which insights can we extract from this data? First - support and resistance. Large amount calls OI above the current price is considered resistance. Large amount puts OI below the current price is considered support.
6/ If we look at tomorrow's BTC expiry for example, we can see small resistance around 20-23k, and a big one at 25k (green spikes). More significantly , we can detect some big support at 18k.
7/ Options data can also give us clues about trend continuation, if we look at it day by day. - Increasing OI in calls + increasing price = bullish trend continuation. - Increasing OI in puts + decreasing price = bearish trend continuation.
8/ When OI are decreasing, it might signal a trend reversal. - Decreasing OI in calls + increasing price = bear divergence (look for signs of bearish reversal). - Decreasing OI in puts + decreasing price = bull divergence (look for signs of bullish reversal).
9/ I think this covers the basics.
Take it with a grain of salt, and as always - combine it with additional indicators to get a better picture.
I'm new to options and still have a lot to learn myself - feel free to share feedback🙂
10/ References and resources:this twitter thread.