For instance, an upward price movement accompanied by increased volume is often viewed as a stronger bullish signal compared to an upward movement with decreased volume. Confirmation of Price Movements: Volume analysis is often used in conjunction with price analysis and other indicators to confirm trends and chart patterns.Volatility Measurement: Increased daily trading volume can also be associated with higher volatility, especially if significant news or events are driving a large number of traders to buy or sell options contracts.For instance, a sudden increase in trading volume might indicate that a new trend is starting, while decreasing volume could signal a potential reversal or the end of a trend. Market Sentiment: Analyzing daily trading volume can also provide insights into market sentiment.A higher trading volume can also lead to narrower bid-ask spreads, reducing the cost of trading. Higher volumes often mean that the option contract is more liquid, making it easier for investors to enter or exit positions at their desired price levels. Liquidity Indicator: The daily trading volume is a primary indicator of options' liquidity.
