How to Read Options Chain? and Analysis

 

How to Read Options Chain? - with Example

An options chain provides in-depth information about the available options contracts for a certain beginning stock or indicator. It substantially shows all the calls and puts available of an underpinning for a particular expiry. The list of options is sorted grounded on the strike price and it displays data on decoration, open interest details, and inferred volatility.

For a freshman in Options trading, an Options Chain Chart may look like a complex maze of data. And it may be invited to understand. Browse across forums and trading websites and you will find Options Chain to be a subject of numerous conversations, with numerous dealers asking questions like

How to read a Stocks Options Chain?'

How to analyze option chain?'

How to dissect the Options chain with a map?'

The option chain is an important map, full of vital information that helps a dealer make profitable opinions. If you want to make profitable trades in Options also learning the Options Chain Chart is a must-have. 

Content :

1. What is a Option Chain ?
2. Understanding a Option Chain
3. Conclusion
4. Options Trading Platform Reviews   

What is an Option Chain?

The options chain can be defined as the listing of all option contracts. and Option Chain Chart is a listing of Call and Put Options It comes with two different sections: call and put. A call option means a contract that gives you the right but does not give you the obligation to buy an underlying asset at a particular price and within the option's expiration date.

Let's first see what an Option Chain looks like and understand the various data available in it. NSE provides you with Option chain charts for all trading Options. Here's what you need to do find the desired Option Chain

• Visit www.nseindia.com and Take your mouse coursor arrow to market data and click to option chain

• On clicking the options chain, I was taken into this page. This is what we were looking for- the Option Chart

Note : This is the Option Chain Chart for NIFTY 50 expiring on JAN 26, 2023

• The Chart is divided into Call and Put Options. On the left side, we have data for Call Options and Put Options on the right side

• At the center of the chart, we have various strike prices.

• On both sides of the strike prices, we have various data like OI, Chng in OI, Volume, IV, LTP, Net Chng, Bid Qty, Bid Price, Ask Price and Ask Qty.

• We also see a part of data on both sides are highlighted in the pinkish shade and the rest is in white.

Understanding an Option Chain

1. Options Type Options are of two types; Call and Put. A Call Option is a contract that gives you the right but not the obligation to buy the underpinning at a specified price and within the expiration date of the Option. Please flash back the contract gives you the right but it isn't obligatory for you to buy the underpinning. A Put Option, on the other hand, is a contract that gives you the right but not the obligation to vend the underpinning at a specified price and within the expiration date of the Option. Then again, the contract gives you the right but it isn't obligatory for you to vend the underpinning. 
2.  Strike price is the price at which you as a buyer and dealer of the Option agreed to exercise the contract. Your Options trade will come profitable only when the price of an Option crosses this strike price. 
3.  We also on both sides of the strike prices, data like OI, Chng in OI, Volume, IV, LTP, Net Chng, shot Qty, shot Price, Ask Price and Ask Qty. let's understand what each of them means 

 

•  OI OI is an condensation for Open Interest. It's a data that signifies the interest of dealers in a particular strike price of an Option. OI tells you about the number of contracts that are traded but not exercised or squared off. The advanced the number, the further is the interest among dealers for the particular strike price of an Option. And hence there's high liquidity for you to suitable to trade your Option when asked . 
•  Chng in OI It tells you about the change in the Open Interest within the expiration period. The number of contracts that are closed, exercised or squared off. A significant change in OI should be precisely covered. 
•  Volume It's another index of dealers interest in a particular strike price of an Option. It tells us about the total number of contracts of an Option for a particular strike price are traded in the request. It's calculated on a diurnal base. Volume can help you understand the current interest among dealers. 
•  IV IV is an condensation for Implied Volatility. It tells us about what the request thinks on the price movement of the underpinning. A advanced IV means the eventuality for high swings in prices and low IV means no or smaller swings. IV does not tell you about the direction, whether overhead or over, movement of the prices. 
•  LTP It's the condensation for Last Traded Price of an Option. 
•  Net Chng It's the net change in the LTP. The positive changes, means rise in price, are indicated in green while negative changes, drop in price, are indicated in red. 
•  Bid Qty It's the number of steal orders for a particular strike price. This tells you about the current demand for the strike price of an Option.  
•  shot Price It's the price quoted in the last steal order. So a price advanced than the LTP may suggest that the demand for the Option is rising and vice versa. 
•  Ask Price It's the price quoted in the last sell order. 
•  Ask Qty It's the number of open sell orders for a particular strike price. It tells you about the force for the Option. 

 

1.  Now let's understand why a part of the date is stressed in a shade while the rest is in white. To understand it, we need to first learn ITM, ATM, and OTM. 

 

•  In- The- plutocrat( ITM) A call option is in ITM if its strike price is lower than the current request price of the beginning asset. A put option is ITM if its strike price is lesser than the current request price' of the beginning asset. 
•  
•  At- The- plutocrat( ATM) When the strike price of a Call or Put option is equal to the current request price of the beginning asset also it's in ATM. 
•  
• Over-The-Money( OTM) A call option is OTM if the strike price is lesser than the current request price of the beginning asset. A put option is OTM if the strike price is lower than the current request price of the beginning asset. 

 

 The stressed part is in ITM while those in the white are OTM. So for Call Options, strike prices lower than the current price of the underpinning are stressed while for Put Options strike prices lesser than the current price of the underpinning are stressed. 

Conclusion

A deep study of Options Chain can provide with a lot of insights on an Option and help you make an informed decision on your trade. So master reading an Options chain to make better trading decisions.

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