Which data points assist in comprehending the formation of short positions on the call side? Let's understand with an example,
- OTM (Out of the Money) call options (with a strike price significantly above the current stock price) show an increase in open interest.
- The price of these OTM calls has decreased while the open interest has increased.
- The put/call volume ratio has increased, indicating more puts are being traded relative to calls.
By combining these data points, it is reasonable to infer that traders might be building short positions on the call side, expecting the stock price to stay below the strike price of these OTM calls.
