An option chain is a list of all option contracts available for a particular underlying asset, such as a stock, index, or commodity. Option chains are typically organized by strike price and expiration date.
Exercise Price:
The exercise price is the price at which the underlying asset can be bought or sold if the option is exercised. Check more on demat account kaise khole.
Expiration Date:
The expiration date is the last date on which the option can be exercised.
Call option:
A call option gives the holder the right, but not the obligation, to buy the underlying asset at the strike price on or before the expiration date.
Put option:
A put option gives the holder the right, but not the obligation, to sell the underlying asset at the strike price before the expiration date.
Optional chain key columns:
- Strike Price: The strike price of an option contract.
- Last: The last traded price of the option contract.
- Change: The change in the price of an option contract from the previous trading day.
- Bid: The highest price a buyer is willing to pay for an option contract.
- Ask: The lowest price at which the seller is willing to sell the option contract.
- Volume: The number of option contracts traded on the previous trading day.
Open Interest:
The number of outstanding option contracts that have not yet been exercised or have expired. Check more on demat account kaise khole.
How to analyze option chains:
There are several important points to keep in mind when analyzing option chains.
Implied volatility:
Implied volatility is a measure of the market’s expectations about how much the price of the underlying asset will change in the future. High implied volatility means the market expects the price of the underlying asset to move more strongly.
Open interest:
Open interest shows how much interest there is in a particular option contract. Check more on demat account kaise khole. High open interest indicates that there are many buyers and sellers for the contract, which means that it is more liquid and easier to trade.
Volume:
Volume shows how many option contracts were traded on the previous trading day. High volume indicates that there is a lot of activity in the contract, which can be a sign of strength or weakness.
Using option chain analysis to make trading decisions:
Option chain analysis can be used to make a variety of trading decisions, such as:
Identifying trading opportunities:
By looking at the implied volatility, open interest, and volume of different options contracts, traders can identify opportunities to buy or sell options at favorable prices. Check more on demat account kaise khole.
Hedging risks:
Options can be used to hedge the risks of other portfolio holdings. For example, a trader who owns a stock may purchase a put option on that stock to protect against a decline in price.
Generating income:
Options can be used to generate income through strategies such as covered calls and cash-backed puts. Checks more on demat account kaise khole.
So happy investing in Option chain!
