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Option Chain Analysis Guide

The document provides a simplified guide to understanding an option chain, detailing the layout of call and put options, strike prices, and key metrics such as last traded price, open interest, and volume. It explains how to identify at-the-money strikes, assess support and resistance levels through open interest, and interpret market sentiment using changes in open interest and the put-call ratio. Overall, it emphasizes the utility of option chains in determining market trends and tracking significant players' positions.

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akshay nagare
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44 views1 page

Option Chain Analysis Guide

The document provides a simplified guide to understanding an option chain, detailing the layout of call and put options, strike prices, and key metrics such as last traded price, open interest, and volume. It explains how to identify at-the-money strikes, assess support and resistance levels through open interest, and interpret market sentiment using changes in open interest and the put-call ratio. Overall, it emphasizes the utility of option chains in determining market trends and tracking significant players' positions.

Uploaded by

akshay nagare
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

■ Option Chain Simplified Guide

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Step 1: Understand the Layout - Left = Call Options (CE) - Right = Put Options (PE) - Middle =
Strike Prices

Each side shows data like: - LTP (Last Traded Price) → Current option premium - OI (Open
Interest) → How many contracts are open - Change in OI → Fresh positions added/closed - Volume
→ Contracts traded today

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Step 2: Identify ATM (At-the-Money) Strike Example: - Suppose Bank Nifty spot = 48,000 -
Nearest strike = 48,000 (this is ATM). - Strikes below = ITM for Calls, OTM for Puts. - Strikes above
= OTM for Calls, ITM for Puts.

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Step 3: Look at Open Interest (OI) - If Call OI is highest at 48,500 CE → Strong resistance. - If Put
OI is highest at 47,500 PE → Strong support.

Example: - 48,500 CE OI = 1.2 lakh - 47,500 PE OI = 1.5 lakh → Market likely to trade between
47,500 – 48,500.

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Step 4: Check Change in OI - CE OI increasing → Bearish sentiment. - PE OI increasing →


Bullish sentiment. - Both side OI increasing → Range-bound market.

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Step 5: Use PCR (Put-Call Ratio) PCR = Total Put OI ÷ Total Call OI - PCR > 1 → Bullish - PCR <
1 → Bearish

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Quick Example: Bank Nifty Spot = 48,000 - 47,500 PE OI = 1.5 lakh (Support) - 48,500 CE OI =
1.2 lakh (Resistance) - Change in OI: PEs rising, CEs falling → Bullish - PCR = 1.2 (>1) → Bullish

Likely move = Bank Nifty may go up towards 48,500.

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■ Summary By reading option chain you can: - Find support & resistance - Judge trend
(bullish/bearish/sideways) - Track big players’ positions

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