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क्या है Option Chain और कैसे Analyse करे? | Options Trading-2

Learn2Trade Series: Episode 34

Mr. Vivek Bajaj will describe the next stage of options trading in this 34th session of Learn2Trade. He shares the idea of an option chain analysis in this video. A derivative contract, known as an options contract, is made between a buyer and a seller and used as a risk-hedging tool. At first, he will discuss the option chain. The option chain is the list of all the call and put options, along with their premiums and strike prices, option chain. Then, he will go over the put-call ratio and further explain American and European options. Finally, he will demonstrate the analysis using Reliance Futures, Nifty, and Bank Nifty.

Watch the entire video to learn the fundamentals of option chain chart analysis.

What You Will Learn

The session begins with an overview of basic options concepts, such as call and put options, buyers and sellers, and the difference between in-the-money and out-of-the-money options. Vivek Bajaj emphasizes the need to grasp the fundamentals before diving into deeper concepts, which sets the stage for the main topic, the Option Chain.

The option chain is graphically represented as a sequence of links, with put options on the right and call options on the left. Mr. Vivek Bajaj walks viewers through important Option Chain parameters such as Bid-Ask Spread, Last Traded Price (LTP), Implied Volatility (IV), Change in Open Interest, Volume, and Open Interest (OI). These characteristics are discussed in the context of analyzing market dynamics and making informed trading decisions.

He then moves on to the Options Chain analysis, using Reliance Industries as an example. Call options are shown on the left side of the option chain, and put options are shown on the right. Viewers are taken through the process of analyzing crucial data elements to have a better grasp of market sentiment. The discussion focuses on strike prices, bid-ask spreads, and the role of market makers in determining fair pricing.

Following the conversation on cumulative open interest, the Put-Call Ratio (PCR) is shown. This statistic, which is based on the proportion of put and call options, is used to determine if the market is trending bullishly or bearishly.

Moving on, he explains the difference between European and American options exercising styles. The focus is on European options prevalent in the Indian market, where the right to exercise the option is only available on the expiration date. He again emphasizes how crucial it is to comprehend market expectations, regardless of whether they are for a directional movement or a range-bound scenario.

To show how to understand the Option Chain for potential market ranges, he has used Reliance Industries and NIFTY as case studies. He explores the ideas of Cumulative Open Interest and Change in Open Interest and emphasizes how useful they are for predicting market moves. According to him, a combination of a decline in the put open interest and an increase in call open interest implies a conviction that the market will remain within a particular range.

He concludes the discussion by introducing the concept of options' expiration dates and hints at future discussions on implied volatility and how it influences option prices. He encourages viewers to explore the Option Chain on their own, starting with major indices like NIFTY and gradually expanding to individual stocks.

In conclusion, Learn2Trade's Session 34 offers an in-depth overview of the Option Chain, providing viewers with the skills necessary to use this key instrument for options trading. By the end of this video, you will have a solid foundation to continue your journey into the nuanced world of options trading.

Frequently Asked Questions (FAQs)

Q1. What is the Bid-Ask Spread, and why is it important?

Bid-Ask Spread is the gap between the buying and selling prices supplied by market makers. It is highlighted as an indicator of liquidity, with a narrower spread suggesting more liquid option contracts. Watch this video to understand the concept of market makers, emphasizing their function in supplying the market with liquidity and earning rewards from the spread.

Q2. How is Cumulative Open Interest useful in options trading?

Cumulative open interest is important as it provides an aggregate perspective of the quantity of contracts in the market. Understanding cumulative data for call and put options can offer insights into the overall sentiment of market participants, helping traders make informed decisions.

Q3. What is the difference between European and American options?

European options, which are widely available in the Indian market, allow the option holder to exercise the right only on the expiration date. American options, on the other hand, allow exercise at any point before or on the expiration date.

About Mr. Vivek Bajaj

Vivek bajaj image

The passion for data, analytics and technology is what makes Vivek Bajaj a financial market survivor. The journey as a market participant started in 2002 when the first trade was executed in the options contract of ITC. Life was simpler and easier during that time. Since then technology and Big data have taken over totally. As an early adapter to the complex tools, Kredent was formed to capitalise on the opportunities. He is co-founder of StockEdge and is committed to bring simplicity in the complex world of market data. He is a Chartered Accountant, Company Secretary and an MBA from IIM Indore. He is a part of various committees of exchanges and regulator and he has been an active contributor in the evolution of Indian Derivatives Market.

Learn2Trade Series: Episode 34

Mr. Vivek Bajaj will describe the next stage of options trading in this 34th session of Learn2Trade. He shares the idea of an option chain analysis in this video. A derivative contract, known as an options contract, is made between a buyer and a seller and used as a risk-hedging tool. At first, he will discuss the option chain. The option chain is the list of all the call and put options, along with their premiums and strike prices, option chain. Then, he will go over the put-call ratio and further explain American and European options. Finally, he will demonstrate the analysis using Reliance Futures, Nifty, and Bank Nifty.

Watch the entire video to learn the fundamentals of option chain chart analysis.

What You Will Learn

The session begins with an overview of basic options concepts, such as call and put options, buyers and sellers, and the difference between in-the-money and out-of-the-money options. Vivek Bajaj emphasizes the need to grasp the fundamentals before diving into deeper concepts, which sets the stage for the main topic, the Option Chain.

The option chain is graphically represented as a sequence of links, with put options on the right and call options on the left. Mr. Vivek Bajaj walks viewers through important Option Chain parameters such as Bid-Ask Spread, Last Traded Price (LTP), Implied Volatility (IV), Change in Open Interest, Volume, and Open Interest (OI). These characteristics are discussed in the context of analyzing market dynamics and making informed trading decisions.

He then moves on to the Options Chain analysis, using Reliance Industries as an example. Call options are shown on the left side of the option chain, and put options are shown on the right. Viewers are taken through the process of analyzing crucial data elements to have a better grasp of market sentiment. The discussion focuses on strike prices, bid-ask spreads, and the role of market makers in determining fair pricing.

Following the conversation on cumulative open interest, the Put-Call Ratio (PCR) is shown. This statistic, which is based on the proportion of put and call options, is used to determine if the market is trending bullishly or bearishly.

Moving on, he explains the difference between European and American options exercising styles. The focus is on European options prevalent in the Indian market, where the right to exercise the option is only available on the expiration date. He again emphasizes how crucial it is to comprehend market expectations, regardless of whether they are for a directional movement or a range-bound scenario.

To show how to understand the Option Chain for potential market ranges, he has used Reliance Industries and NIFTY as case studies. He explores the ideas of Cumulative Open Interest and Change in Open Interest and emphasizes how useful they are for predicting market moves. According to him, a combination of a decline in the put open interest and an increase in call open interest implies a conviction that the market will remain within a particular range.

He concludes the discussion by introducing the concept of options' expiration dates and hints at future discussions on implied volatility and how it influences option prices. He encourages viewers to explore the Option Chain on their own, starting with major indices like NIFTY and gradually expanding to individual stocks.

In conclusion, Learn2Trade's Session 34 offers an in-depth overview of the Option Chain, providing viewers with the skills necessary to use this key instrument for options trading. By the end of this video, you will have a solid foundation to continue your journey into the nuanced world of options trading.

Frequently Asked Questions (FAQs)

Q1. What is the Bid-Ask Spread, and why is it important?

Bid-Ask Spread is the gap between the buying and selling prices supplied by market makers. It is highlighted as an indicator of liquidity, with a narrower spread suggesting more liquid option contracts. Watch this video to understand the concept of market makers, emphasizing their function in supplying the market with liquidity and earning rewards from the spread.

Q2. How is Cumulative Open Interest useful in options trading?

Cumulative open interest is important as it provides an aggregate perspective of the quantity of contracts in the market. Understanding cumulative data for call and put options can offer insights into the overall sentiment of market participants, helping traders make informed decisions.

Q3. What is the difference between European and American options?

European options, which are widely available in the Indian market, allow the option holder to exercise the right only on the expiration date. American options, on the other hand, allow exercise at any point before or on the expiration date.

About Mr. Vivek Bajaj

Vivek bajaj image

The passion for data, analytics and technology is what makes Vivek Bajaj a financial market survivor. The journey as a market participant started in 2002 when the first trade was executed in the options contract of ITC. Life was simpler and easier during that time. Since then technology and Big data have taken over totally. As an early adapter to the complex tools, Kredent was formed to capitalise on the opportunities. He is co-founder of StockEdge and is committed to bring simplicity in the complex world of market data. He is a Chartered Accountant, Company Secretary and an MBA from IIM Indore. He is a part of various committees of exchanges and regulator and he has been an active contributor in the evolution of Indian Derivatives Market.

Other series by Elearnmarkets

Through this series, watch Vivek Bajaj simplify investing and key components required to build a habit of investing and unleash the power of compounding.

All Episodes

Other series by Elearnmarkets

Watch Mr. Vivek Bajaj introduce the basic concepts of trading and discuss the various stock market indicators.