Option Chain Analysis Ready Reckoner
Golden Rule: Think Like a Seller while doing Option Chain Analysis of any underlying asset
Only see premiums at Out of the Money (OTM)
CALLS PUTS Change in Open Interest (OI) DataSl Net Change in Premium (NC)
Fresh Short Created Fresh Short Created
Trader is entering to take sell position at that strike Trader is entering to take sell position at that strike
price thinking that asset value will decrease than the price thinking that asset value will increase than the
strike price at which he is entering [Link] position strike price at which he is entering [Link] position
will be open when he takes his position now. will be open when he takes his position now.
Trader sentiment currently is Trader sentiment currently is
He thinks that spot price will go below his strike He thinks that spot price will go above his strike price Increasing (+)
price
Asset value will decrease from current spot Asset value will increase from current spot
price price
Long Unwinding Done Long Unwinding Done
Trader has taken buy position at that strike price Trader has taken buy position at that strike price
thinking the asset value will increase than the strike thinking the asset value will decrease than the strike
price at which he has taken position long time back price at which he has taken position long time back
and he predicted right as well, the asset value and he predicted right as well, the asset value
increased and he is in profit, now he either thinks decreased and he is in profit, now he either thinks that Decreasing (Red Color Numbers)
that spot price may come back to this strike price spot price may come back to this strike price and asset
and asset value keeps decreasing at which he has value keeps increasing at which he has taken the
taken the [Link] either his idea is to book profit position..So either his idea is to book profit or limit his
or limit his loss and close the position by selling the loss and close the position by selling the position
position Trader sentiment currently is
Trader sentiment currently is He thinks that spot price is coming near to its strike
He thinks that spot price is coming near to its strike price and further aset value increases, so he decides to Decreasing (-)
price and further aset value decreases, so he close the position by selling back the position
decides to close the position by selling back the (Generally here traders are booking profits
position (Generally here traders are booking profits)
Asset value will decrease from current spot Asset value will increase from current spot
price price
Fresh Long Created Fresh Long Created
Interpretation
Here Trader changes his seller mentality. Here Trader changes his seller mentality.
He thinks that there is a clear indication that if he He thinks that there is a clear indication that if he
create buy position at this strike price, then asset create buy position at this strike price, then asset value
value is going to increase. So he is going to decrease. So he
creates buy position at that strike price. creates buy position at that strike price.
Trader sentiment currently is Trader sentiment currently is
He thinks that asset value will increase than current He thinks that asset value will decrease than current
spot price, hence he takes buy postition here. ( spot price, hence he takes buy postition here. ( Increasing (+)
Generally traders with seller mentality use this Generally traders with seller mentality use this option
option only when they hedge and they have fear only when they hedge and they have fear that market
that market can go against their sentiment) can go against their sentiment)
Asset value will increase from current spot Asset value will decrease from current spot
price price
Short Covering Done Short Covering Done
Trader has taken sell position at that strike price Trader has taken sell position at that strike price
thinking the asset value will decrease than the strike thinking the asset value will increase than the strike Increasing (Green Color numbers)
price at which he has taken position long time back price at which he has taken position long time back
and he predicted right as well, the asset value and he predicted right as well, the asset value
decreased and he is in profit, now he either thinks increased and he is in profit, now he either thinks that
that spot price may come back to this strike price spot price may come back to this strike price and asset
and asset value keeps increasing at which he has value keeps decreasing at which he has taken the
taken the [Link] either his idea is to book profit [Link] either his idea is to book profit or limit his
or limit his loss and close the position by buying the loss and close the position
position Trader sentiment currently is
Trader sentiment currently is He thinks that spot price is coming near to its strike Decreasing (-)
He thinks that spot price is coming near to its strike price and spot price may cross his strike price and
price and spot price may cross his strike price and futher asset value decreases, so he decides to close
futher asset value increases, so he decides to close the position by buying back the position (Generally
the position by buying back the position (Generally here traders are booking profits)
here traders are booking profits)
Asset value will increase from current spot Asset value will decrease from current spot
price price