Find the Likely Direction

The single hardest part of option trading is forming a directional view before sizing a position. Three signals make that easier.

Volatility skew

Skew shows where the option market is paying up. Steep negative skew on a big-cap stock often precedes an earnings disappointment. See About Volatility Skew.

Put/call open interest ratio

Track the running ratio of put open interest to call open interest. Sharp moves in the ratio — especially when accompanied by volume — flag a sudden shift in positioning.

Strike pegger / open interest concentration

Identify the strike with the most open interest in the front month. Stocks have a tendency to "pin" near these levels into expiration as dealers hedge.

Combining all three rarely tells you exactly where a stock will go, but it often tells you which side has the asymmetry, and that's enough to bias position sizing.