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What is a call wall in options open interest?

In options trading, “open interest” refers to the total number of outstanding or unclosed options contracts for a particular strike price and expiration date. It represents the total number of contracts that have been created but have not yet been exercised, expired, or closed.

Why is a call wall relevant to traders?

A “call wall” typically refers to a situation where there is a significant concentration of open interest in call options at a specific strike price. This concentration creates a “wall” of call options, indicating a large number of market participants who hold bullish expectations for the underlying asset’s price to rise and have purchased call options at that particular strike price.

The presence of a call wall can have implications for the price movement of the underlying asset. If the price of the underlying asset approaches or exceeds the strike price of the call wall, it can create upward pressure on the asset’s price. 

Market participants who have sold these call options (known as “writers” or “sellers”) may need to hedge their positions by buying the underlying asset, contributing to upward momentum.

How can traders take advantage of call walls?

Traders and analysts often pay attention to call walls as they can potentially act as support levels or resistance levels, depending on the market sentiment. It’s important to note that the interpretation and significance of call walls may vary depending on the specific market conditions and the context in which they are observed.

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