For many its still a Complex domain, for few an important tool.
A Thread 🧵 on #OptionChain & basic use from the scratch with example :
Option Chain is a place where we can scan Strike Price, Open Interest, Premium & Price of a derivative for a particular expiry and derivative
A Thread 🧵 on #OptionChain & basic use from the scratch with example :
Option Chain is a place where we can scan Strike Price, Open Interest, Premium & Price of a derivative for a particular expiry and derivative
Let's see the components and what you need to find out from the Options Chain :
Link - nseindia.com
Expiry
- Monthly & Weekly in Index.
- Monthly in Equity
Option Chain Components below with middle value as Strike prices:
Link - nseindia.com
Expiry
- Monthly & Weekly in Index.
- Monthly in Equity
Option Chain Components below with middle value as Strike prices:
Details :
1.) OI - Total no. contract in series which are open for Trading and will be set off before expiry,
2.) Change in Oi - It states total number of positions Open or Closed for the day. Oi advances when new contracts are added and declines when contracts are squared off.
1.) OI - Total no. contract in series which are open for Trading and will be set off before expiry,
2.) Change in Oi - It states total number of positions Open or Closed for the day. Oi advances when new contracts are added and declines when contracts are squared off.
Call Option (CE) - Buy this when you expect an increase in price and Sell this when you expect a decrease in Price
Put Option - Buy this when you expect a decrease in price and sell this when you expect an increase in price
What is Strike Price ? Refer image attached
Put Option - Buy this when you expect a decrease in price and sell this when you expect an increase in price
What is Strike Price ? Refer image attached
Other important Columns in Option Chain :
1. Volume - Its calculated on daily basis which summarizes the total no of contract created. Options with high volume creates liquidity
2. Net Change - Its the change in LTP wherein a positive change indicates rise in price & vice-versa
1. Volume - Its calculated on daily basis which summarizes the total no of contract created. Options with high volume creates liquidity
2. Net Change - Its the change in LTP wherein a positive change indicates rise in price & vice-versa
3. IV - Implied Volatility
This is a vast topic to cover however to summarize its just an indication for the swings or potential moves. It doesn't indicates any direction of the stock.
If the IV is high it means the potential of large price swing is higher and vice versa.
This is a vast topic to cover however to summarize its just an indication for the swings or potential moves. It doesn't indicates any direction of the stock.
If the IV is high it means the potential of large price swing is higher and vice versa.
4. Bid Quantity - No. of buy orders for a particular contract & strike
5. Bid Price - It's a price of last buy order & a price which a buyer has to pay for the contract. If its higher than LTP that's an indication that demand for that particular price is increasing & vice versa
5. Bid Price - It's a price of last buy order & a price which a buyer has to pay for the contract. If its higher than LTP that's an indication that demand for that particular price is increasing & vice versa
6. Ask Price - Its the lowest proposed / quoted selling price. The ask price, also known as the "offer" price, will almost always be higher than the bid price.
7. Ask Quantity - It's the number of sell orders open indicating the supply for the Contract / Option
7. Ask Quantity - It's the number of sell orders open indicating the supply for the Contract / Option
Use of OI -
📌Can identify Support & Resistance
📌Forecasting of Direction of Trend
📌Provides key information on liquidity of any option
📌Clear data of contracts traded and squared off
📌Can identify Support & Resistance
📌Forecasting of Direction of Trend
📌Provides key information on liquidity of any option
📌Clear data of contracts traded and squared off
Interpretation -
📌 RESISTANCE - When Call Oi is created at any particular Strike majority is NOT EXPECTING it to breach and sustain BELOW that mark.
📌 SUPPORT - When Put Oi is created at any particular Strike majority NOT EXPECTING it to breach and sustain BELOW that mark.
📌 RESISTANCE - When Call Oi is created at any particular Strike majority is NOT EXPECTING it to breach and sustain BELOW that mark.
📌 SUPPORT - When Put Oi is created at any particular Strike majority NOT EXPECTING it to breach and sustain BELOW that mark.
I trust & believe this would help those who wish to learn and understand Option Chain a bit, Will be covering other details in next thread soon.
If you like the thread pls do RETWEET and SHARE :)
Happy weekend 💚
If you like the thread pls do RETWEET and SHARE :)
Happy weekend 💚
Typo -
📌 RESISTANCE - When Call Oi is created at any particular Strike majority is NOT EXPECTING it to breach and sustain "ABOVE" that mark.
📌 RESISTANCE - When Call Oi is created at any particular Strike majority is NOT EXPECTING it to breach and sustain "ABOVE" that mark.
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