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The total number of outstanding option contracts at a given strike and expiration. High OI indicates liquidity and can reveal support/resistance levels through dealer hedging.
⚡ KEY TAKEAWAY: High OI at a strike = tighter spreads and better fills. Concentrated put OI can act as a floor — useful when picking short put strikes.
Term Structure
Contango = normal, good for sellers. Backwardation = market stress, reduce position size or wait.
Contango
Normal state = green light for sellers. VIX/VIX3M below 0.9 means term structure strongly supports premium selling.
Backwardation
Market is pricing more fear now than later. Reduce size, tighten stops, or sit out until contango returns.
VIX (Volatility Index)
VIX 15–25 is the sweet spot for premium sellers — enough fear for rich premiums, not enough for gap risk.