Before putting on an option’s position an investor may want to research which expirations and strikes are the most heavily traded. This information can be used by the investor to see where liquidity is, which expirations potential events may fall in, where public sentiment believes the underlying may, or may not go to as well as a general sense of the volume associated with the option classes and which expirations are active during certain time periods.
The Interactive Brokers TWS Option Activity Analysis tool enables the investor to track the open interest and trading volume of the options in each expiration and the time frame the positions were put on. The Option Activity Analysis tool can be accessed by clicking on the New Window icon in the top left-hand corner, scrolling down to the Option Tools area and selecting Option Analysis. In the drop-down window select Option Activity and choose either “Open Interest by Strike” or “Option Volume by Strike”. Either choice will bring up the Option Activity Analysis tool and the investor can switch between Open Interest and Option Volume by clicking on a drop-down menu. They can also choose to see calls and puts displayed in the same chart or separately.
Using the Option Activity Analysis Tool, the investor is going to walk through researching the option open interest on BlackRock’s iShares Bitcoin Trust ETF (Symbol: IBIT) which began trading on November 19, 2024. In the tool they can choose which expiration to see by clicking on the plus sign next to the expiration dates. The investor will start by selecting all expirations to and selecting to see puts and calls in separate charts. Each expiration is color coded, and the strikes are displayed across the horizontal axis.
From the display it looks like the January 17 ’25 expiration has the most open interest, so the investor is going to isolate the January expiration by unclicking all others and can drill down into the timing of when and which positions were put on.
The January 17 ‘25 54 strike has the most open interest, with over 90,000 contracts in both the calls and puts, by hovering over the strike the investor can see the total open interest. IBIT is currently trading at $56.25 so the 54 calls are currently in the money and the puts are out of the money, but by isolating the dates when these positions were put on the investor can see where the underlying was trading on those days.
The investor can either work their way backwards from the current date or once the expiration or expirations are isolated, they want to research start from the date that expiration was first listed. Since all current IBIT expirations were listed on November 19th the investor will start on that date.
It looks like after the first day of trading the January 55 calls open interest was 30,000 while the 54 calls and puts were minimum.
The investor now looks four days ahead to see that the open interest in the 55 calls has increased at some point between the 19th and the 25th to 63,000 while the open interest in the 54-strike is still relatively small.
Next the investor looks up November 29th and sees that the open interest in the January 54 calls is now 81,500 and the puts is now 80,000, while the 55 calls open interest has dropped to 39,000.
As the investor is narrowing down when the position in the January 54 calls and puts was established, in this case it was November 27th , they can bring up an Interactive Brokers Chart to track the underlying price for each day. A chart can be brought up by going to the New Window, scrolling down to the General Tools area, hovering over Chart, and selecting either Advanced Chart or Chart. For more on Charts please see the Traders’ Academy lesson (add link). By using the Crosshairs feature the investor can easily see the price of the stock on any given day. As the chart below shows IBIT was trading between 53.66 and 55.49 on November 27th placing the 54 calls and puts squarely at-the-money at the time most of the open interest was established.
The investor can continue to drill down into IBIT’s open interest and volume to see which strikes and expirations are the most active in IBIT and use that information to help with their trading strategies.
Disclosure: Interactive Brokers
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Interactive Brokers, its affiliates, or its employees.
Disclosure: Options (with multiple legs)
Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by clicking the link below. Multiple leg strategies, including spreads, will incur multiple transaction costs. “Characteristics and Risks of Standardized Options”
