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How to use option chain data for future and option trading

Option chain data is the complete picture pertaining to option strikes of a particular stock or index in a single frame. In the Option chain frame, the strike price is at the centre and all data pertaining to calls and puts on the same strike are presented next to each other. The option chain not only captures the price and volume data but also more analytical parameters like the shifts in open interest (OI), shifts in implied volatility (IV) etc. Learn more about NSE Option Chain(https://www.edelweiss.in/market/nse-option-chain) today!

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How to use option chain data for future and option trading

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  1. HOW TO USE OPTION CHAIN Before understanding how to read the NSE Option Chain, let us first look at the key components of the option chain. An option chain trading strategy can be formulated by seeing accumulations in OI and volumes in various option strikes. There are two ways to approach the option chain data. There is the index approach which tells us not only about trading the index but also about the market as a whole. Similarly, the sectoral indices are very useful in giving us cues about the attractiveness or otherwise of the particular sector in question. Then there are stock specific option chains which are useful as an added analytical screener before taking a final decision on buying or selling a stock. This option chain analysis can be used as an additional level screener for stock decisions.

  2. Interpreting Nifty Options Chain • It gives you a quick and rapid picture of in-the-money and out-of-the money options. While the strikes shaded in yellow are the ITM options, the un-shaded strikes are the OTM options. This rule applies to calls and to puts. • The option chain allows the trader to evaluate the liquidity and depth of each specific strike. The option chain does not only capture the executed price but also captures real time bid price, ask price, bid quantity and ask quantity. When you combine these, you get a clear view of depth and liquidity in each strike and also overall. • The Nifty option chain can be used as an advance warning system of sharp moves or break outs in the index. More so because large institutions are more active in index options and they account for over 70 % of daily trading. The sudden spurt in OI of a particular strike or the reduction of OI at a strike is indicative of much focused action in the Nifty. This can be a useful pointer for traders. Know more about NSE option Chain today!

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