In recent years, Taiwanese Index Futures Option has drawn most investors’ attention and more and more investors join the Taiwan Index Futures Option market. Taiwan Index Futures option’s characteristics, limited risk and diploid profit, makes a lot of ordinary investors have dreams of being millionaires. However, in Taiwanese derivatives market, to be an ordinary investor is difficult to make money when trading with professional traders or institutes like banks or trust funds. In Sharleen’s book, Volume and open interest: cutting edge trading strategies in the futures markets (1991), he suggested that volume and open interest are important indicators when trading in derivatives market; according to the foreign empirical studies, it also proves that open interests is more referential that other passive indicators.
The first purpose of this research is to detect the changes in option market as trading references to help investors make decisions in Taiwanese stock market and derivatives market. By using one function of derivatives market, price discovery, we can forecast the price trend in the spot market. So, we can increase the probability of profitability. The second purpose of this research is to offer a warning signal for investors when there are extraordinary trading situation happened in option market.

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