The market leaves clues every day. By checking a few key indicators after the close, you can build a practical view for the next session and plan option trades with more confidence.
1️⃣ Put–Call Ratio (PCR) – Market Sentiment
PCR measures the balance between puts and calls and acts as a real-time sentiment gauge. A rising PCR shows traders are selling more puts (bullish confidence), while a falling PCR signals more call selling (bearish bias). Extreme highs or lows often warn that the crowd is too one-sided and a reversal could follow.
- Rising PCR: More put selling → strong support, likely bullish tomorrow.
- Falling PCR: More call selling → resistance, possible bearish move.
- Extreme PCR: Very high or low → crowd imbalance, possible reversal.
Example: PCR moves from 1.0 to 1.35 while Nifty gains 120 points → strong sign of continued upside next day.
2️⃣ Open Interest (OI) – Positioning Map
OI shows where option writers—often big players—are defending positions, creating hidden support or resistance. Heavy put writing signals strong floors, while heavy call writing marks ceilings. Late-day OI spikes can reveal where the market may try to move tomorrow.
- Put Writing: Heavy puts below price → support zone for next session.
- Call Writing: Heavy calls above price → resistance zone for next session.
- Late OI Surge: Sudden build near close → potential target strike next day.
Example: Big put OI at 19,200 PE and call OI at 19,600 CE → market likely to stay between 19,200–19,600 unless a breakout occurs.
3️⃣ Pivot Points & Central Pivot Range (CPR) – Key Price Levels
Pivot levels convert today’s range into tomorrow’s support and resistance map. Where the market closes relative to CPR gives the initial bias, while the width of CPR signals how volatile the next day might be.
- Close Above CPR: Buyers in control → bullish bias.
- Close Below CPR: Sellers dominant → bearish bias.
- Narrow CPR: Tight band → chance of a breakout.
- Wide CPR: Broad band → likely sideways action.
Example: Nifty closes at 19,350, above CPR top 19,300, with CPR width only 40 points → high-probability bullish breakout next session.
4️⃣ Implied Volatility (IV) & India VIX – Volatility Barometer
These numbers reflect how much movement traders expect and help gauge risk. Rising IV or VIX points to sharper swings and faster option premium changes, while falling readings show a calmer market that favours trend continuation.
- Rising IV/VIX: Market expects sharp swings, option premiums may expand quickly.
- Falling IV/VIX: Market calm → supports a steady trend.
Example: India VIX falls from 14 to 13 during an up-move → low fear and steady environment for call buyers.
5️⃣ Price Action – Today’s Market Shape
The day’s structure provides context for tomorrow. Trend days often continue, while range or inside days set up for breakout moves.
- Trend-Up Day: Persistent buying → often continues higher tomorrow.
- Trend-Down Day: Consistent selling → often continues lower tomorrow.
- Range Day: Sideways trade → likely quiet session next day.
- Inside Day: Smaller range → often breaks out strongly.
Example: Nifty opens at 19,150 and closes at 19,350 with higher highs and volume → a classic trend-up day likely to extend gains.
6️⃣ Evening Checklist – Quick Routine
Review these items in order each evening to frame your next-day plan.
- Step 1: Check PCR to read sentiment direction or extremes.
- Step 2: Review OI to locate strongest support and resistance strikes.
- Step 3: Mark CPR/Pivots to note if today’s close is above, below, or inside range.
- Step 4: Watch IV/VIX for signs of calm or upcoming volatility.
- Step 5: Assess Price Action to confirm trend, range, or breakout setup.
7️⃣ Sample Scenarios for Option Buyers
| Parameter | Bullish Example | Bearish Example | Sideways Example |
|---|---|---|---|
| PCR | 1.35 rising from 1.0 → positive sentiment | 0.65 falling from 0.9 → negative sentiment | 1.0 flat → neutral |
| Close vs CPR | Above CPR top 19,300 → upside bias | Below CPR bottom 48,000 → downside bias | Inside CPR 19,450–19,520 → range |
| Open Interest | Strong puts 19,200 / calls 19,600 → clear support & target | Heavy calls 48,500 / weak puts 47,800 → strong resistance | Heavy OI both sides at 19,500 → balance |
| India VIX | Down 14→13 → calm | Up 12.5→15 → volatile | Stable near 14 → steady |
| Price Action | Trend-up day | Trend-down day | Range day |
| Likely Move | Rise toward 19,600 | Fall toward 47,800 | Oscillate 19,450–19,550 |
| Buyer Plan | Buy slightly ITM Call (19,300 CE) | Buy slightly ITM Put (48,200 PE) | Avoid buying, risk of time decay |
🔑 Key Takeaway
- Sentiment: PCR reveals bullish or bearish crowd bias.
- Positioning: OI shows where big players defend or cap prices.
- Levels: CPR and pivots mark tomorrow’s key zones.
- Volatility: IV/VIX tell if a big move or calm trend is likely.
- Context: Today’s price action confirms momentum or signals reversal.
Using this structured routine each evening helps option buyers decide whether to buy calls, buy puts, or stay out, and to select strikes with the best chance of profit the very next day.