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How to Use Option Levels in Trading
Table of Contents
Level rebound and level breakout are among the most popular trading techniques in any market, including Forex. It’s common knowledge that big market players don’t pick just any price level to open a trade. Instead, they choose strong support and resistance levels for that purpose. To identify these levels, traders mostly use a graphic approach relying on the history of price action. However, it’s not the best method to use, especially for intraday trading. This is where options levels come into play. Nowadays, to use real-time data in your trading, you don’t need to make manual calculations. This task can be handled by eVOLution-options, an option level indicator for the MT4 platform.
In this article, I’ll discuss the essence of options analysis and break down how to use the eVOLUtion-options indicator to profit from currency fluctuations.
What is a stock option?
A stock option gives its holder the right to buy or sell a specific amount of the underlying asset at a strike price. A stock option is a derivative financial instrument. The cost of an option is called the premium.
Stock options are widely used by big market players to achieve their goals. The Chicago Mercantile Exchange (CME) is the place where the biggest amount of options is traded. There you’ll find all kinds of stock options. However, Forex traders are mostly interested in futures options on major currencies.
How are option levels useful?
Option levels with a large open interest can predict where the price will face a major obstacle that will cause it to change its direction. Until recently, to identify option levels, traders had to download economic research reports from the CME official website and then calculate futures options prices by hand.
While the calculations per se were not that complicated, they still took time. To make traders’ lives easier, the algorithm for calculating option levels was developed. With the new tool custom-designed for the MT4 platform, traders didn’t have to spend time calculating the current support and resistance levels.
To understand how the option level indicator works, we first need to see the structure of reports on which the calculations are based on.
Let’s make a quick overview of option types. Options come in two types. While some options give you the right to buy the underlying asset, others give you the right to sell the underlying asset.
A call option gives its buyer the right to buy a certain amount of the underlying stock at a predetermined price (strike price). If the price for the underlying asset grows, the holder of a call option will make money. In this case, potential profits are unlimited while the potential losses won’t exceed the premium paid for the option.
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If you have to sell a call option, the situation is just the opposite. While your potential losses are unlimited, your profits won’t exceed the premium.
A put option is the polar opposite of a call option. A put option gives the buyer the right to sell a certain amount of the underlying asset at the specified price. In this case, you’ll earn money if the price for the underlying asset is falling.
As you can see, holders of call and put options are the two conflicting groups of traders that pursue different goals.
- Option buyers are hoping for the price to grow so that their options are executed at the predetermined price and generate profits. At the same time, option sellers are keeping their fingers crossed that the price won’t reach the target level.
- Buyers of both put and call options confront each other, pursuing the opposite goals.
As options are mostly purchased by big market players, the price around the option levels with a large open interest is facing a strong resistance. It’s not uncommon that a reversal occurs even before the price comes close to a significant level because the opposing group of traders are trying to prevent the options from being executed.
Keeping in mind this information about the option levels, let’s apply the eVOLution options indicator and identify significant support/resistance levels on the chart.
What information does eVOLution options provide?
eVOLution-options is a popular and free indicator that helps traders identify the current option levels right on an MT4 chart. After you’ve installed and added the indicator to your chart, it should look like this.
To download the latest 1.7 version of eVOLution-options, click here. To add the tool to your MT4 platform, do the following:
- Open MT4 and click on “File” in the left upper corner. Select “Open Data Directory.”
- In a new window, click on MQL4. Inside the directory, you’ll find to find the “Indicators” folder.
- Unzip the downloaded indicator and add the “eVOLution-options.1.7.ex4” file to the “Indicators” folder.
- Create a folder named “evolution-options” in “Files.”
You don’t normally do the last step when installing indicators. The thing is, to plot option levels, the eVOLution-options indicator needs the data from daily reports published on the CME website.
The data are classified by asset and date, which makes it easy to find the right information.
Wonder where to find the option levels for oil? With eVOLution-options, it’s easy! Along with major currencies, it also plots significant support/resistance levels for commodities.
Whether to download reports on all or selected assets is for you to decide. Every trader can customize this amazing indicator to fit their needs.
How to set up evolution-options
Restart the platform after installing the indicator and downloading the report data. Open the chart you’ll be trading on. Drag the indicator from the “Navigator” window to the chart. A window with settings will open.
Here is the list of customizable settings:
- Number Of Days – You set the period for plotting option levels.
- Hide For Long Timeframe (true/false) – You can choose to show option levels from shorter timeframes. The default setting is “true” so the Н4 and D1 charts will contain intraday options levels. To hide intraday levels, change the parameter to “false.”
- Show Key Zone (true/false) – You can show or hide Key Zone.
- Show Major Levels (true/false) – You can leave minor levels or only show Major Levels for more aggressive trading.
- Show Major CALL Levels (true/false) – You can only show levels for call options (resistance).
- Show Major PUT Levels (true/false) – You can only show levels for put options (support).
Plus, you can change the colors of graphic objects on the chart. If you’re using a white background, it’s better to change the Key Zone Arrow Color from White to Black to make the arrows clear and visible.
Here is how the indicator looks on the chart. Everything is pretty clear, right?
The best trading technique is to trade price rebounds from significant levels. If the level has been broken, you should enter at the breakout after the price has retested the broken level.
EVOLution-options indicate entry points with arrows. The arrows usually occur around the yellow negative and blue positive zones. A downward arrow signals that you should go short below the yellow zone. An upward arrow signals that you should go long once the price climbs above the blue zone.
Horizontal Levels Indicator
I need your help finding/coding an indicator that would allow me to draw multiple horizontal lines on the chart. I’m not after an indicator that paints pivot points or S/R levels, I want something where I can add the prices myself. I want to use the futures volume data from the eVOLution website by VolumeTrader. Every day new data is released so there would need to be 5 slots (one for every day of the week) and each has to have a custom color which can be changed (easy to distinguish between days). I’ve been adding these horizontal lines to the chart manually, but it takes up a lot of time and when new data comes in, finding the old ones and replacing them with the new ones takes ever more time. With an indicator described above, I would just erase the levels from the inputs and paste new price data and be done with it.
The reason I want to use this is that I’ve found the futures volume data to be quite useful in determining price targets once price has already started moving in the direction of the liquid price area. I don’t know if an indicator like this exists and I’m not a coder, but if one cannot be found, I’d be very happy to see someone code the indicator.
This is what it should look like on the chart
This is my idea of the inputs UI
This is where I get the data from, price are separated by semicolons.
- Post # 2
- Edited at 6:19pm Aug 13, 2020 6:05pm | Edited at 6:19pm
Try the following script.
Download .mq4 and .ex4 files into . /experts/scripts folder.
Download .mqh files into . /experts/include folder.
1. Drag the script from MT4’s Navigator onto your chart.
2. Click the Load button to load any previously saved set of values (this saves having to type them in each time).
3. Make any additions or changes to levels. Separate multiple levels for same day using semi-colons (; ).
4. Click the Save button to save the current settings.
5. Click OK and the script will plot the lines on your chart.
The script removes all lines plotted by a previous run of the script, and then (re-)plots lines at the levels you’ve specified.
However, if you want to retain the previous lines, set DeletePreviousLines to FALSE.
Hence, to remove all previously plotted lines, simply perform steps 1 and 5 (DeletePreviousLines is set to TRUE by default).
You can use the Save button to create as many files as you need, e.g. different file names for different currency pairs, different weeks, puts as opposed to calls, etc. And then retrieve previous levels by loading the required file(s).
That’s the best that I can do, given the limitations imposed by MT4, and the time that I have available.
(I chose a script instead of an indicator, because scripts allow the use of the Load/Save buttons).
- Post # 3
- Aug 13, 2020 7:55pm Aug 13, 2020 7:55pm
thank you so much for popping in and devoting some of your time to code this thing. I know you’re a busy man and you’ve other things to do than write pieces of code for FF folk and I want you to know that I really appreciate your time and effort. The coding you did works just the way I imagined it would, even better in fact. The option to save the data is really something I didn’t see coming and it’s a great addition. Wow. Thanks again!
- Post # 4
- Edited at 10:02am Aug 14, 2020 2:08am | Edited at 10:02am
@bug: no problem, glad you’re happy with it.
@anybody: attached is an indicator (NOT script) that plots call and put levels from the CME webpage. I wrote it for a client a few months ago, but he hasn’t paid me for the work, so I’ll post it publicly.
Download .mq4 and .ex4 files below into . /experts/indicators folder.
Download .mqh files from post #2 into . /experts/include folder.
1. Go to the webpage in the link above. Select your desired settings from the dropdowns (Trade Date, Type, Expiration).
2. Press Ctrl-A to select the entire page, Ctrl-C to copy it, and Ctrl-V to paste it into an empty text file (use a text editor like Notepad).
3. Save the text file in the . /experts/files folder, under the name CMEOPT_EURUSD.TXT (if EURUSD is the relevant currency pair). Overwrite any existing file of the same name.
4. Attach the indicator to a EURUSD chart. The indy will plot all of the put and call lines within TolerancePips of the current price.
Set LineLength to 0, if you want a horizontal line across the width of the whole chart.
InputFilename should match the file name you used in step 3; the wildcard [sym] will automatically insert the symbol of the chart (e.g. EURUSD) to which the indy is attached (hence the levels will be automatically read from the correct file, whenever you switch to a different pair).
The other settings should be self-explanatory.
Press F8 in MT4 and check ‘Show object descriptions’ ON, and you’ll be able to see the call/put data above the plotted line. Or simply hover the mouse cursor over the line, and the data will display in the pop-up help bubble.
Every time data on the CME webpage is updated, you’ll need to re-run steps 1,2,3 to update the file. Then the indy will read and plot the updated data.
If CME changes the HTML content/format of their webpage, then the indy will probably no longer work.
- Post # 5
- Aug 14, 2020 5:30am Aug 14, 2020 5:30am
- Post # 6
- Sep 1, 2020 1:28am Sep 1, 2020 1:28am
Hanover, in the hope that you drop by sooner or later.
1. Put the two mqh files from post #2 into . /include folder
2. Put both files from post #4 in indicator folder
3. For testing purposes, replicated your EUDUSD example, put corresponding .txt file into . /files folder, also attached (dd 2020-08-31)
4. Started MT4:
– attached is the error log generated from CME options levels
– data window shows error CMEOPT_EURUSD.TXT not found, thought the file is there.
I am on MT4 built 509
Any advise to make this work is highly appreciated
Thanks in advance / Mop
- Post # 7
- Sep 1, 2020 3:41am Sep 1, 2020 3:41am
Warning errors during compile don’t matter.
Check that file name ends in .txt (the one you posted ends with .txt.txt) and resides in . /experts/files folder.
Check that you’re on correct currency pair’s chart.
I downloaded your file and renamed it to CMEOPT_EURUSD.TXT
Then attached indy onto EURUSD chart using default parameter settings, and got the result in attached screenshot.
I am running Windows XP SP2, Pepperstone MT4 build 500. Yours could be a Vista/Win7/Win8 permissions problem (jnfo here).
- Post # 8
- Sep 1, 2020 8:11am Sep 1, 2020 8:11am
thanks a lot – no idea how I ended up with double txt extension – fixed it & now works as per your image
Thanks for the coding and for answering my question so quickly!
- Post # 9
- Sep 3, 2020 5:10pm Sep 3, 2020 5:10pm
- Post # 10
- Oct 12, 2020 1:13pm Oct 12, 2020 1:13pm
- Post # 11
- Oct 12, 2020 2:25pm Oct 12, 2020 2:25pm
- Follow the instructions in post #4 carefully.
- Make sure that you name the file correctly in step 3 (if you don’t, you’ll get an error message in the top left corner of the main chart).
- Make sure you attach the indy to the correct chart (e.g. a EURUSD chart, if you captured EURUSD data from the CME website).
- Use the indy’s default parameter settings.
Result shown in screenshot.
- Post # 12
- Edited at 5:25am Oct 13, 2020 5:10am | Edited at 5:25am
thanks for popping in. I just updated to W8 so that might be an issue, but truth be told, I didn’t spend a lot of time on trying to find the fault. It’s good to hear the options website is still functional with the indicator you so kindly provided. I’ll have another look at it, but as I said before, I’m perfectly happy with the futures data.
Thanks for your time, David!
Well I spent some additional time trying to get it to work, but no luck. I’ve installed MT4 into a non-program files folder so that can’t be the issue. The MT4 journal tells me the indicator was loaded successfully, so I’ve no idea what’s going on.
- Post # 13
- Oct 17, 2020 2:44am Oct 17, 2020 2:44am
I have found an indicator called Effort index code it for Amibroker. I think it’ll be helpful to have it for MT4, because i couldn’t find a similar version. It could be helpful in combination with other indicators such as Better volume.
Unfortunately I don’t use Amibroker, therefore, I don’t really know the logic behind this AFL code.
Attached you can view the afl file.
Information and logic for this indicator are here:
- Post # 14
- Feb 12, 2020 7:53am Feb 12, 2020 7:53am
Hi Hanover – i was hoping you could help me with a simple script that is similar to your options level work. Prior to the MT4 6 build this script would run perfectly after copying to clipboard the levels below (price level -1st line, then its description below it), now it compiles and loads but does not plot any lines. I am taking orderflow information copied from various sources like IFR or MNI in this format:
Strong offers Large stops on break
50% 1.3894 1.3477 Stops on break
Strong offers 1.3683 Feb11 high
61.8% 76.4% 1.3683 26
38.2% 50% 1.3683 26
Int.Day high Europe, Asia 1.3641
Int.Day low Asia (76.4% 1.3609 83)
100dma Feb10 low
Medium demand 1.3602 61.8% 1.3552 1.3683
21dma Cloud base
76.4% 1.3552 1.3683 1.3580 50% 1.3477 1.3683
Strong demand 1.3552 Friday Feb7 low
Source code below:
string GlobalLock(int hMem);
int GlobalUnlock(int hMem);
int OpenClipboard(int hOwnerWindow);
int GetClipboardData(int Format);
int resistanceColour = Black;
int supportColour = Black;
int lineStyle = STYLE_DOT;
int lineWidth = 1;
int lineDescColour = Black;
string hLinePrefix = “IFR_Level_”;
if (OpenClipboard(0) != 0)
int hMem = GetClipboardData(1); //CF_TEXT
if (hMem != 0)
myClipboardText = GlobalLock(hMem);
// Delete existing horizontal lines
int objTotal = ObjectsTotal();
for (int i = objTotal – 1; i >= 0; i–)
objName = ObjectName(i);
if (ObjectType(objName) == OBJ_HLINE)
if (StringFind(objName, hLinePrefix) == 0)
// Loop through copied clipboard generating horizontal lines
int pos = 0;
double prevLevel = 0.0;
- Post # 15
- Feb 12, 2020 1:58pm Feb 12, 2020 1:58pm
- Post # 16
- Feb 13, 2020 9:20am Feb 13, 2020 9:20am
- Post # 17
- Apr 15, 2020 1:05am Apr 15, 2020 1:05am
thanks for your idea about using levels on evolution trading website..
and thanks to.. hannover who did an amazing work for this..
but i just wandering how could this data help you in your trading startegies.
since the data are lag. -_-‘
i tried this script on tuesday nearly london OP market.. but i couldnt get futures data on monday from evolution website..
so i used friday data.. and it look like this :
so my opinion.. this could be so help full when we can get data on real time..
see market on friday on that chart?? market moved to level which is guessed..
maybe i miss one or more things from your insight.. wish you could share your method further..
god bless you two..
- Post # 18
- Apr 18, 2020 3:15pm Apr 18, 2020 3:15pm
Well, the idea behind that is really simple, in fact. Even though a lot of FX trading takes place on the spot market, futures volume is still relevant. Since data on spot FX transactions is impossible to come by (of course in-house traders in large FX dealers have the data, but they’re not about to share it with anyone), I opted for futures data as a proxy. So with that in mind I wanted to look for data that could give some insight where the liquidity was – ie. price ranges in which market participants were willing to buy and sell with above average volume. Some might think that outdated information is useless, but I’ve observed that these volume levels (specifically areas around a specific price) tend to act as support and resistance, or at the very least, medium term stopping points before a continuation as momentum builds up.
I’ve found that it’s best to use this data when setting price targets. I use price action, a few select indicators and the news feed to give me a sense of where the market is headed and only then do I use futures volume data. Let’s say the previous week was bearish and the market tumbled 320 pips. There’s really no point in looking at levels from the previous week and fantasizing about the market hitting them this week if the trend is still bearish. However, if the trend has changed then you could do very well indeed by using the volume levels as you exit points.
There’s plenty more where that came from but I don’t want to inundate you with all of it. If you’re still interested after reading through the links above, try searching this site and others for: market profile, volume profile, order flow, forex volume. Go for the free stuff first and only pay for stuff once you’re absolutely sure you’re not being taken for a ride.
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На основании этой информации, трейдеры могут предполагать дальнейшее движение цены и скорректировать свою стратегию соответственно.
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อันดับที่ 1 ในการจัดอันดับโบรกเกอร์ตัวเลือกไบนารี!
อันดับที่ 2 ในการจัดอันดับ! นายหน้าที่เชื่อถือได้