Options Liquidity Meter (OLM)

❓ The question behind this indicator
When trading options, it is common to experience situations where price moves in the expected direction, yet the option contract does not increase in value as anticipated.

This typically happens when one or more of the following conditions is missing:

• Insufficient liquidity participation
  
• Lack of volatility expansion
  
• Weak or passive order flow
  

Options Liquidity Meter (OLM) was created to address this specific question:

“If price moves from here, are there conditions for option premiums to actually expand?”

🎯 What this indicator does

Options Liquidity Meter is a context tool, not a trading system.

It evaluates whether the current market environment is favorable for option premium expansion, based on three core engines:

1. Liquidity (Relative Volume)
   Measures whether price movement is supported by meaningful participation.
   
2. Volatility State
   Identifies compression, release, and expansion phases, where options tend to respond differently.
   
3. Order Flow Activity (OBV-based)
   Acts as a proxy for active vs. passive participation, helping filter hollow moves.
   

These components are combined into a single, easy-to-read options context.

🟢🟡🔴 Options Context Output

The indicator displays one consolidated state:

• RED — NO EXPANSION
  Price may move, but option premiums often do not respond.
  
  
• YELLOW — BUILDING
  Liquidity or volatility is developing. Conditions are improving but not fully aligned.
  
  
• GREEN — EXPANSION LIKELY
  Liquidity, volatility expansion, and active flow are aligned.
  This is a favorable environment for option premium expansion.
  

The same logic is reflected visually through the background color and summarized in the dashboard.

📊 How to read the dashboard
The dashboard shows:

• Liquidity: LOW / OK / HIGH
  
• Volatility: COMPRESSED / RELEASED / EXPANDING
  
• Order Flow: FLAT / ACTIVE
  
• Options Context: NO EXPANSION / BUILDING / EXPANSION LIKELY
  

Below, a Background Color Meaning section explains what each color represents, making the indicator intuitive and educational.


📍 Where to apply this indicator
Options Liquidity Meter must be applied to the underlying asset chart, such as:

• Indices (SPY, SPX, QQQ, etc.)
  
• Stocks
  
• Futures
  
• ETFs
  

It is not designed to be applied to option contracts themselves.

The indicator evaluates the market conditions of the underlying, which are the drivers that influence option premium behavior.
Contract selection (strike, delta, gamma, expiration) remains the trader’s responsibility.


🧠 How to use it

1. Use your own methodology to define:
   Direction
   Structure
   Entries and exits
   
3. Use Options Liquidity Meter to evaluate:
   Whether the current environment supports option premium expansion
   
4. If the context is RED, be cautious — price may move without rewarding options.
   
5. If the context is GREEN, the environment is statistically more favorable for options responsiveness.
   

🔗 Complementary tools
Options Liquidity Meter is designed to complement, not replace, other tools.

It works well alongside:

• Opening Path Selector (EMA200 Context Tool)
  For deciding which asset offers the cleanest directional context.
  
  
• Multi-Tool VWAP + EMAs (Multi-Timeframe) + Key Levels
  For in-chart structure, bias, and reference levels.
  

Each tool addresses a different stage of the decision process and can be used independently.


⚠️ Important notes

• This indicator provides context only
  
• It does not generate trading signals
  
• No indicator guarantees results
  

Use at your own risk.