For Call Options: We categorize an option contract as having a "Bearish" sentiment when:
The volume surpasses the open interest, and the closing price of the contract for the day is less than its closing price from the previous day.
This understanding is rooted in the observation that while increased buying activity, especially from those executing "Buy to Open" orders, typically drives the option's price up, a decrease in the option's price often signals that sellers, particularly those with "Sell to Open" orders, have a stronger influence in the market, indicating a bearish sentiment for the underlying asset.
For Put Options: We classify an option contract as having a "Bearish" sentiment when:
The volume exceeds the open interest and the closing price of the contract for the day is greater than its closing price from the previous day.
This rationale arises from the fact that while selling activity usually pressures the price of a put option down (indicating a bullish sentiment for the underlying asset), an uptick in the contract's price often signifies that buyers, executing "Buy to Open" orders, are more influential, reflecting a predominant bearish sentiment in the market.