The option chain can sometimes be overwhelming for beginners. After all, there is a lot of information presented on the option chain. However, once you get the hang of it, navigating the option chain can be a piece of cake. Let’s explore how to access the NSE Option Chain and understand the information presented.
How to access the NSE Option Chain
The NSE Option Chain is available on various websites, including the NSE’s official website. You can also access the option chain through various brokerage firms like UPSTOX, ICICI Direct, Zerodha, and Kotak Securities.
To access the option chain on NSE’s official website, follow these steps:
1. Go to www.nseindia.com.
2. Hover over ‘Live Market’ in the top left-hand corner.
3. Select ‘Option Chain’ from the dropdown menu.
4. Select the desired stock from the drop-down menu.
Understanding the information presented on the option chain.
After accessing the option chain, you’ll see various columns with different information. Let’s discuss each column in detail:
The price at which the option holder can buy or sell the underlying asset.
Last Traded Price: the price at which the last trade occurred.
The difference between the LTP of the current day and the previous trading day.
Implied Volatility: the expected stock price movements.
The number of option contracts traded during the day.
The total number of contracts that are currently open.
The number of contracts buyers are willing to purchase at a specific price.
The price that buyers are willing to pay for a specific number of contracts.
The number of contracts sellers are willing to sell at a specific price.
The price that sellers are asking to sell for a specific number of contracts.
Interpreting the Option Chain
Now that we’ve understood how to access and navigate the option chain let’s discuss how to interpret the information presented correctly.
Analysis of the Strike Price, Expiry Date, and Option Type
The three key factors you need to analyze before investing in an option contract are the strike price, expiry date, and option type.
Look for specific strike prices that are within your price range.
Select an expiry date that aligns with your trading strategy. Remember that the premium price tends to be higher for options contracts that are farther in the future.
Look for an option type that aligns with your trading strategy. For example, if you’re bullish about a particular stock, look for call options. If you’re bearish, look for put options.
Interpretation of the Open Interest, Volume, and Implied Volatility
Open Interest is a crucial parameter that traders look at while analyzing the option chain. It provides investors with an idea of the number of contracts that are currently open and haven’t been settled. A high open interest indicates high liquidity, meaning that investors can quickly enter and exit positions.
Volume gives traders an idea of how many contracts have been traded during the day. High volume usually indicates that there is a lot of trading activity happening on that particular stock.
Implied Volatility (IV) is an important parameter in options trading. It is the expected volatility of the underlying stock over the life of the option contract. Higher implied volatility indicates that the market is expecting significant price movements in the future.
Navigating the MCX Option Chain like a pro may seem daunting at first, but it’s a valuable skill that can help you make successful options investments. Understanding the basics of options trading, the key terms, how to access the option chain, and interpreting the data presented will help you make informed decisions about which options contracts to invest in. Remember always to do your research, backtest your trading strategies, and manage your risk appropriately. Happy trading!