Market Tide
Daily Aggregated Premium and Volume Indicator
This indicator measures the daily aggregated premium and volume of option trades. It calculates the difference between the value of options transacted at or near the ask price and those transacted at or near the bid price.
Example: If $15,000 in calls are transacted at the ask price and $10,000 at the bid price, the aggregated call premium is:
$15,000 - $10,000 = $5,000
Example: If $10,000 in puts are transacted at the ask price and $20,000 at the bid price, the aggregated put premium is:
$10,000 - $20,000 = -$10,000
More calls bought at the ask suggest bullish sentiment, while more puts bought at the ask suggest bearish sentiment. If both lines are close, the sentiment is neutral. Diverging trends indicate increasing bullish or bearish sentiment.
Indicators of Bearish Sentiment
- Aggregated call premium decreases rapidly.
- Aggregated put premium increases rapidly.
Volume is calculated as the difference between aggregated call and put volumes. This method uses the same principles as premium calculations.
Example: If 10,000 more calls and 5,000 more puts are transacted at the ask compared to the bid, the aggregated volume is:
10,000 - 5,000 = 5,000
Since not all options are priced equally, premium must be considered alongside volume for a clearer picture.