Stock Market : Option Chain Analysis in English 2023, What is Option Chain, Know Complete information
Yuva Patrkaar, New Delhi : Hello Guy's, today we will tell you about Option Chain Analysis in English. That is, what is an option chain. And about how to do Option Chain Analysis. If you also want to know about this. So definitely read this post till the end.
Option Chain is a very powerful tool. Using which traders trade in options. In this post, we will tell you about option chain in detail.
Guy's, when we step into the world of trading or option trading. Then we come to know about a lot of new things. through which it can be detected. When the price of options can go up and when it can go down. One of them is 'Option Chain'
Which will help you a lot to become successful in the field of options trading. So Guy's, now without losing much time in detail, let us know about Option Chain Analysis in English. But before that let us know a little bit about the option chain.
What is option chain?
An option chain is a chart that shows data for Call and Put options of various strike prices. Option Chain is directly related to those shares of the index. In which futures and options are bought and sold. Through option chain data analysis, you can increase your trading accuracy significantly.
Option chain acts as a very powerful tool in F&O trading. So that you can easily get all the important data in one place.
In other words, if we talk about Option Chain Analysis in English, then the option chain is a chain of strike prices of call and put options. Which displays things like Open Interest, Bid and Ask Price, Volume, Last Traded Price (LTP), Implied Volatility (IV) etc.
In the beginning, understanding the option chain can be very intimidating for most people. Because when we go to the website of NSE for the first time and see the data of the option chain. So many numbers are visible there. Anyone gets scared on seeing them.
But don't worry, today we will explain you option chain in such a simple language that after reading this article what is option chain. There will be no need to ask anyone about this. So let's know now Guy's. How does the option chain work?
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How does Option Chain work?
Option chain acts as a very powerful tool in share market trading. Which is used by big traders. Option Chain lets you see a lot of important data at one place. Which helps you a lot in doing intraday trading or option trading.
How to View Option Chain Data?
To view the option chain data, you have to follow the steps given below –
- To see the option chain data, first of all you have to search on Google by writing 'NSE Option Chain'.
- After that you will see the first website of NSE, in which you have to click.
- Now the main page of NSE Option Chain will open in front of you.
- Then in the Left Side you will see View Option Contract For. Where from here you will see the complete option chain data of indices like – NIFTY, BankNifty etc.
- If you want to see the option chain data of any company's stock. So on the side of that you will see the option of 'Select Symbol'. From which you can easily see the complete option chain data of any stock according to your choice.
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How to understand option chain?
In this article on Option Chain Analysis in English, how should we now understand you option chain? I am going to tell about it. So that you can understand it easily and become a successful trader. To understand the option chain, you must first understand the strike price. you must know that
There are two words in Option Chain. One Option and the other Chain. We have just talked about the option in detail, but what is a chain? About it did not do. It is very important for you to know the meaning of the word Chain. Because it helps you to understand the option chain.
The word 'Chain' was added to the option chain because we see a lot of data of Call and Put Options in the form of a Chain only. Be it Strike Price, Open Interest, Volume or Bid Ask Qty, a complete chain of all these data is formed. That is why it is called option chain.
The call and put options with which you trade in option trading. Of course they do, they have multiple strike prices. Also, different data is displayed against each strike price. Like – Volume, IV, Bid Qty, Open Interest, Ask, Change in OI, Qty etc.
Let us now understand this with an example-
Like the current price of Nifty and Bank Nifty. It is called an ATM (At The Money) option in the option chain. Suppose now Nifty is trading at 18200. Then its ATM strike price will also be 18200 only.
But Guy's, in the option chain, not only ATM, but also strike prices like ITM (In The Money) and OTM (Out The Money) are also present. For example, if the market is currently running at 18200, then its OTM will be 18300, 18400, 18500, 18600, 18700….
All these are OTM strike prices. On whose upper side a very long chain is made. Similarly, the ITM of NIFTY 18200 will be – 18100, 17900, 17800, 17700, 17600….. All these are ITM strike prices. A very long chain is made below them.
At the same time, ATM is kept in the center of the option chain data. Along with this, when the price of Nifty changes in the live market. So its ATM, ITM and OTM also keep changing accordingly.
These are all the strike prices like OTM, ITM and ATM. In front of these you will see different open interest, bid price, volume, ask price etc. of all the strike prices.
So Guy's, a huge chain is formed in this way. And that's why you see a lot of numbers in the option chain data. Because each number is different in front of the strike price which is present in the row and column. In that strike price has its own separate data.
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What does looking at option chain data reveal?
This is known by looking at the option chain data. In which direction the market will trade today, Nifty or BankNifty will go up or down. Not only this, but apart from this, by doing option chain data analysis, you also get to know about many types of important support and resistance levels.
Along with this, you also get to know by looking at the option chain data. How many people are sitting on which strike price and what is the current rate of that strike price. And how much is the open interest at that strike price. This is also known.
If you want to know the resistance level and support by looking at Option Chain Data. Then you can follow the steps given below –
- First of all you have to find that strike price. Whose open interest is the highest in the data.
- Always try to get the strike price at which the market is trading. Find the strike price with the highest open interest closest to it.
- After seeing the strike price with higher open interest, you will easily know that the price will not be able to go higher than that, it is very difficult.
- Means you can demand resistance from him. This will be the first resistance, similarly the strike price with open interest slightly less than the strike price will be your second resistance.
- Similarly, you can easily find the support on the put side by looking at the strike price with the highest open interest.
- But keep in mind Guy's, in both of these, you have to see the open interest near the current market price (ATM).
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What is option chain analysis?
Now the turn has come. To know about Option Chain Analysis in English. The analysis of the open interest of the strike price is called option chain analysis. To do option chain analysis, you have to carefully analyze the open interest of various types of strike prices.
How to do Option Chain Analysis?
To do Option Chain Data Analysis, you have to analyze each and every data of option chain in detail one by one. For this, we have given some important points below. Which you must pay attention to.
Let us tell you in advance that some important points are given below which you may find a bit advanced and complicated. But it is also necessary. So read and understand them comfortably –
- First of all see which one has more Change in Open Interest (CHNG IN OI). whether in call or put.
- Also the IV of Call is high. Or Fi Put's IV, you have to see it. And the one whose IV is more has to buy only.
- Don't go to the side whose IV is less. If IV is breaking. So it means that the selling of OPTIONS is happening in high quantity.
- See in Change in OI that more changes are happening in the call. Or in Put, then find out the PCR (Put Call Ratio) of both. If this ratio is more than 1, then you can buy it.
- Note that you only need to combine the data for a few strikes to calculate the PCR.
- Also keep an eye on how much data is changing every 5 minutes.
- See PCR Slope, if it is Uptrend. So buy Call and if there is Downtrend. So buy Put.
- Stocks that have high liquidity. Option chain analysis works very well in them.
FAQs:
1. What should be the IV in option trading?
Most traders are comfortable with an IV of 20% to 25%.
2. How much money is involved in option trading?
Trading in options charges 0.03% to 0.60% per transaction for one execution. Explain that it also depends on different stock market broking firms. Zerodha charges ₹100 per order for futures and options.
3. What is the best way to learn options trading?
To learn and practice option trading, you need to have the knowledge of Call and Put options, strike price, option greeks, price movement indicators, chart patterns, etc. as well as technical analysis. You can also buy books. Which will help you a lot in learning Option Trading.
Conclusion
So Guy's, in this post you learned about Option Chain Analysis in English. hopefully. That you must have come to know something new through this article written by me. Through the information given by this, you will need a lot of ease in trading.
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