I did read articles and gone through some videos about OIs. Still, it seems to be like a blind spot in my understanding. I kind of see that OI refers to the number of active contracts that have been exchanged between buyers and sellers at each strike price. However, beyond that, it doesn't seem to provide much utility for me.
So personally, I'm curious how you interpret it, perhaps subconsciously. The number of 'active contracts' at a price does indicate that the price itself acts like a *high-accumulation zone*, where buyers and sellers may push to keep prices from breaking out either way. I mean, obviously more people are interested near that area, so that checks out. I assume if we were to compare it with price action, it is almost similar to volume profiles? Please correct me if I'm wrong.
What I am genuinely interested in is how do you gauge smart money activity or corporate interest with OI data for price movements and high-volume inflows? For each strike price, there are calls and puts, both of which have *dual-direction interests* with buyers and sellers. This is one confusing aspect of using OI data to form an up or down opinion on the market.
Option buyers place long calls and short puts, betting on high and low prices, respectively. While these bets are countered by the sellers themselves (who take higher risks) against their positions. This weird clash is again another point of confusion, kinda disallowing me to understand their correlation to price-action movements. Seriously can't figure out what OI data says anymore about market direction.
Looking for more folks to help me with this.