📊 What is Options Chain?
An options chain is a table showing all available Call and Put options for a stock or index, organized by strike prices and expiry dates. It displays key metrics like Open Interest (OI), volume, premium, and Greeks.
Think of it as a menu in a restaurant - it shows you all available options (no pun intended!) with prices and details, helping you make informed trading decisions.
📈 Understanding OI & Volume
Open Interest (OI)
Definition: Total number of outstanding option contracts that haven't been closed or exercised.
- • High OI: Strong support/resistance level, high liquidity
- • OI Increase: New money coming in, trend likely to continue
- • OI Decrease: Traders closing positions, trend weakening
Volume
Definition: Number of contracts traded in a day.
- • High Volume: Strong interest, better liquidity
- • Volume Spike: Important price action happening
- • Low Volume: Less interest, wider spreads
⚡ Implied Volatility (IV)
Implied Volatility is the market's expectation of how much the price will move. Higher IV = Higher premium prices.
• High IV: Expensive premiums, sell options
• Low IV: Cheap premiums, buy options
• IV Rank: Compare current IV to historical range
🇬🇷 Understanding Greeks
Delta (Δ)
Price sensitivity. Call: 0 to 1. Put: -1 to 0.
Gamma (Γ)
Rate of change of Delta. Higher near ATM.
Theta (Θ)
Time decay. Premium decreases with time.
Vega (ν)
IV sensitivity. How much premium changes with IV.
📖 Step-by-Step: How to Read Options Chain
1. Select Your Stock/Index
Choose Nifty, Bank Nifty, or any stock. Check current spot price.
2. Identify Strike Prices
Find ITM, ATM, and OTM strikes. ATM has highest OI usually.
3. Check OI & Volume
Look for strikes with high OI and volume - these are key levels.
4. Analyze Premiums
Compare Call vs Put premiums. High Put premium = bearish sentiment.
💼 Using Options Chain for Trading Decisions
Key Strategies:
- • Max Pain Theory: Price moves to strike with max OI (causing most losses)
- • PCR Ratio: Put/Call ratio > 1 = bearish, < 1 = bullish
- • OI Build-up: Watch where new OI is building for direction
- • Support/Resistance: High OI strikes act as support/resistance
❓ Frequently Asked Questions
What is PCR ratio in options chain?
PCR (Put/Call Ratio) = Total Put OI / Total Call OI. PCR > 1 indicates bearish sentiment, PCR < 1 indicates bullish sentiment.
How to find support and resistance from options chain?
Look for strike prices with highest Open Interest. These levels often act as strong support or resistance because many traders have positions there.
What is max pain in options chain?
Max pain is the strike price where maximum number of options expire worthless (causing maximum losses to option buyers). Price often moves toward max pain near expiry.
Practice Reading Options Chain
Use Zerroday's real-time options chain to practice reading OI, volume, IV, and Greeks with live Nifty & Bank Nifty data.
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