Learn how stock and options trading works along with the important basic definitions. Explore the professional content and get ready to start trading! Learn everything about technical analysis, options, bonds, and fundamental analysis!

Definition of options

Risk graph

The Option Greeks

Option orders

The risk of options

Option Volume and Open Interest

Volume means the contracts traded on a single day. Open Interest is the number of open positions related to a given option. An option position is open, if it has been bought and hasn’t been sold or the option right hasn’t been executed. The two are not necessarily the same data, although it might be confusing first. If the Volume is low, the Open Interest can be still high. The higher the value of the Open Interest, the bigger the chance to close the position and the higher the option’s liquidity. Another way to measure liquidity is to observe the value of the Bid/Ask spread. Bid is the price for which traders can sell an option, Ask is the price for which traders can buy an option. If the difference is high between the two then it has a negative effect on the profitability.

As an example, the Open Interest and Option Volume indicators of MSFT are shown for both Put and Call options. It is clear that the activity of Call options exceeds the activity of Put options. It means that investors expect the prices to increase.

Open Interest and Volume of Call and Put options on an MSFT share

Open Interest and Volume of Call and Put options on an MSFT share

The next chart shows DJX index. The increasing Put/Call ratio indicates a growing bearish market mood, when the investors buy Put options to hedge.

Volume of Call and Put options and the Put/Call ratio on a DJX index.

Volume of Call and Put options and the Put/Call ratio on a DJX index.

Put/Call ratio

The definition of volatility

Calculating volatility

Implied volatility

Volatility smile

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Trading Guides


25 indicators. Find the indicators matching Your strategy and learn their trading signals through examples!

Candlestick patterns

88 candlestick patterns. Increase Your profit by recognising candlestick patterns and analysing the market with their help.

Chart patterns

31 chart patterns. Recognise triangles and breakouts, calculate the target prices defined by them.

Option strategies

49 option strategies. Apply the strategies that best suit your purposes and learn how to calculate their potential profit and risk through examples.