What is Option Chain & How to Read Option Chain?

Xero Accountants for Construction Companies Cloud Software
April 13, 2021
Лучшие Торговые Платформы в 2023: Топ Площадок
April 27, 2021

Interpretation of Futures Open Interest, Interpretation of Options Open Interest, Analyzing OI with Real Option Chain Data, How to Identify Short Term Market Trend? A skilled trader can use the option chain to understand the direction in which the price is moving. Besides, it helps in the identification of points where a low or high level of liquidity is seen. It also allows traders to analyze the depth and liquidity of particular strike prices.

book on option chain analysis

On the other hand, Put Option is a contract that gives you the right but not the obligation to sell the underlying at a specified price and within the expiration date of the Option. Here again, the contract gives you the right but it is not mandatory for you to sell the underlying. The seller is obligated to sell the commodity or financial instrument should the buyer so decide.


An option chain chart is a listing of calls and puts for an underlying asset with a pre-determined expiration period. The components of the chart include options type, strike price, open interest, volume, implied volatility, and other factors. An option chain is a chart with detailed information of all option contracts available for Nifty stocks. But after they understand how to read option chain data, they have access to more information and can make better decisions within the market. The options market is very difficult to comprehend, especially for novice traders.

book on option chain analysis

Available product types are CNC (Cash & Carry), EMF , MIS , MIS+ and CNF . This is applicable during the office hours to sole holder Resident Indian accounts which are KRA verified, also account would be open after all procedures relating to IPV and client diligence is completed. There is no AMC charged on Demat account for the first year. All other charges will apply as per agreed tariff rates. Now let’s understand why a part of the date is highlighted in a shade while the rest is in white. To understand it, we need to first learn ITM, ATM, and OTM.

What is Option Chain?

A call option is said to be in ATM if the strike price is equal to the current spot price of the security. A put option is said to be ITM if the strike price is more than the current spot price of the security. A call option is said to be in ITM if the strike price is less than the current spot price of the security. Gamma describes the rate of change of an option’s delta with respect to the underlying asset’s price and is used to gauge price movement of an option. Good honest insights on options trading, the strategies discussed could have been more elaborate and more examples could have been provided.

When you find Max OI & volume of any OTM PE strike rate, will work as support. An Option Chain Chart is a listing of Call and Put Options available for an underlying for a specific expiration period. The listing includes information on premium, volume, Open Interest etc., for different strike prices. Selling premium is a regular strategy in getting a niche in the market as it puts probability on the trader’s side.

book on option chain analysis

For MIS+ product, while placing order user places first leg order along with compulsory Stop loss trigger order (i.e second leg) & optional book profit trigger order . First leg order gets tagged with second/third leg order and profit and loss will be calculated based on such tagging and will be computed based on the pair of trades that book on option chain analysis get executed through the product. The offer is open only for a limited period at the sole discretion of the company and applicable only to new accounts opened up to June 30, 2023. The offer is only for waiver of account opening charges of Rs 354. All other charges as well as taxes and other statutory/Exchange charges continue to apply.

Gamma hedging is an options hedging strategy designed to reduce or eliminate the risk created by changes in an option’s delta. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in oureditorial policy. Sharekhan Comtrade Private Limited does, however, gather certain information that is provided by you to the Web Site.

Unique identifiers are collected to verify the user’s identity. We use this data to tailor the visitor’s experience at the Web Site, showing them contents that we think they might be interested in, and displaying the contents according to their preferences. Traders can identify fundamental support and resistance levels for a stock/index.

Option chain is an important chart, full of vital information that helps a trader make profitable decisions. If you want to make profitable trades in Options then mastering the Options Chain Chart is a must. RhoRho refers to the metric used for assessing the sensitivity of an option to the changes in the risk-free interest rate.

Open Interest refers to the interest of traders at a particular strike price. A higher amount indicates more interest among traders for the strike price of the option. There are around 9 stock exchanges in India offering a secure trading platform to investors. There are eight stock exchanges in India, out of which the Bombay Stock Exchange and the National Stock Exchange are the two prominent ones.

Basics of Option Trading In India:

Naked PutA naked put is a bullish options strategy wherein the investor writes a put option without having a short position on the underlying stock. The book tells you how listed options and non-equity option products provide you with new and strategic opportunities for investment management. It also offers you the latest market-tested tools that can improve your portfolio’s earning potential while limiting its downside risk irrespective of the market performance. In case you start using more complex strategies, moneyness becomes even more important. Another example,May be a strategy might involve buying in the money contracts and then writing out of the money contracts on the same underlying security. Data in the option chain chart is grouped into 4 quadrants.

  • The Yellow quadrant data is for In the Money contracts and the White quadrant data is for Out of the Money contracts.
  • Here the buyer only stands to lose the premium amount.
  • When you see Max OI & volume of any OTM CE strike rate, will work as resistance.
  • For example, say the strike price for a contract is Rs.200 when the buyer booked it for a premium of Rs.20.
  • To understand this we should be knowing moneyness of an option.
  • Any personally identifiable information of the customers obtained by us shall not be used or shared other than for the purposes to which the customers consents.

McMillan also offers detailed advice on trading index options, trading options on futures, and measuring market volatility. Option chain is a list or table of all available option contracts. It includes stocks and index with put option and call option, for a given security. The table includes information on Open Interest, volume, Implied Volatility, strike price, premium etc. of a option contract for a given exipration date. Remember, just as there is an option chain for the Nifty, banknifty & other, you have option chains for all the key indices traded in F&O and also for individual stocks where options trading is permitted. However option chain is relevant only when the contract is sufficiently liquid.

#2 – Options Trading Crash Course

Fundamentalist and technical analysts also use the option chain data as an important data point as an authority for their view. Even for chartists, option chain data trends can be an additional evidence to be considered. Once you understand the option chain, choosing the best strike price becomes easy. Besides this it also tells you about outstanding contracts of options in the market.Open Interest also indicates strength & weakness in a particular direction of market. It is a data that signifies the interest of traders in a particular strike price of an Option.

The Web Site supplements the information that you provide with information that is received from third parties. Sharekhan Comtrade Private Limited uses your IP address to help diagnose problems with our server and to administer the web site. Your IP address is used to identify you and your shopping cart and to gather broad demographic information. Sharekhan Comtrade Private Limited requests the minimum information it believes necessary to achieve this goal.

NYSE Pillar is designed to improve efficiency and reduce complexity for customers, while enhancing consistency, performance and resiliency. The highlighted part is in ITM while those in the white are OTM. So for Call Options, strike prices lower than the current price of the underlying are highlighted while for Put Options strike prices greater than the current price of the underlying are highlighted.

Demographic and profile data is also collected at the Web Site. The Web Site use this data to tailor its visitor’s experience at the Web Site, showing them content that it thinks they might be interested in, and displaying the content according to their preferences. https://1investing.in/ This information is shared with advertisers on an aggregate basis. The Web Site’s registration form may require users to give us contact information (like their name, phone number and e-mail address), unique identifiers and demographic information .

Stock Options Chain Analysis Using Excel

Once the contract expires, a new contract for the next month is generated. As a buyer or seller, you can hold the contract till the expiry. Thereafter if you don’t buy or sell then the contract expires, and you will lose the premium amount. Analysis of futures and option chain to understand market trend and sentiment is an excellent approach, covered in this book. Strike price is the price at which you as a buyer and seller of the Option agreed to exercise the contract.

Leave a Reply

Your email address will not be published. Required fields are marked *