Strategy description

Trading Stock Options Using CPR (Central Pivot Range) Levels

Trading stock options using the CPR (Central Pivot Range) method involves identifying market structure, trend direction, and volatility through pivot-based price zones. CPR helps traders understand whether the market is likely to trend, consolidate, or reverse, providing high-probability zones for option buying. The method is built on price–volume behavior around central pivot points and support/resistance layers, allowing traders to execute more disciplined and structured trades.

1. Understanding CPR and Market Structure

CPR consists of three lines — Pivot (P), Top CPR (TC) and Bottom CPR (BC). When plotted on charts, these levels act as a dynamic structure showing where institutions may support or reject price. CPR narrows during periods of price compression and widens when the market trends strongly.

Key understanding:

• Price above CPR → bullish bias

• Price below CPR → bearish bias

• Price inside CPR → consolidation or indecision

Additionally, CPR works as an intraday index-strength indicator: the more price respects CPR levels, the stronger the trending or reversal signal.

2. Core CPR Tools & Concepts

CPR Width Analysis

• Narrow CPR: Expect trending movement or breakout.

• Wide CPR: Sideways or range-bound trading likely.

CPR as Support & Resistance

• Bounce from CPR: Trend continuation.

• Break and retest of CPR: Trend reversal confirmation.

Virgin CPR (V-CPR)
A CPR level untouched on the previous session becomes a powerful support/resistance zone. When price approaches V-CPR, expect strong reactions and potential option-buying opportunities.

Price–Volume Confirmation
Volume expansion near CPR levels validates breakouts or breakdowns, making option trades more reliable.

3. Trading Setup for Option Buying with CPR

Identify CPR Bias and Strength

Mark CPR, TC, BC for the day.

Check whether CPR is narrow or wide.

Observe price opening relative to CPR.

Bullish Trade Conditions

Price opens above CPR or breaks above CPR with strong volume.

Retests and holds CPR/TC zone as support.

Entry near CPR bounce with confirmation candle.

Bearish Trade Conditions

Price opens below CPR or breaks below CPR with volume.

Retests and rejects CPR/BC zone.

Entry on confirmation candle at CPR rejection.

Targets and Stops

First target near R1/S1, second near R2/S2 pivot levels.

Stop-loss below TC/above BC depending on direction.

Stocks Bajaj finance, Axis  Bank, Jindal steel, Dixon, HDFC bank, Maruthi