Feeling confused by all the numbers on the NSE option chain? Don’t worry, it happens to everyone! This guide is here to help you understand it easily.
Making smart choices when trading options is important, and the option chain is like a cheat sheet. We’ll explain what you need to know and even give you a free Excel tool to make things even simpler.
Think of the option chain as a big list of all the choices you have for buying or selling a stock at a certain price. It also shows cool things like open interest, which tells you how many people are already in the trade, and a put-call ratio, which helps you guess what everyone else thinks will happen.
Ready to understand the option chain and trade with more confidence? Let’s dive in!
Download Free Option Chain Excel
Table of Content
Understanding the Option Chain and its Significance
The option chain serves as a comprehensive display of all available options for a particular stock. Discover the importance of option chain analysis in understanding market sentiment, assessing liquidity, and identifying potential trading opportunities.
Key Indicators in the Option Chain
Learn how to interpret crucial indicators within the option chain, including Trending Open Interest (OI), Put-Call Ratio (PCR), and Max Pain. These indicators offer valuable insights into market trends, sentiment, and the potential behaviour of options contracts.
Open Interest
Open Interest in options refers to the total number of outstanding contracts for a specific option contract. It represents the total number of contracts that have been initiated and are yet to be closed through offsetting transactions. Each option contract consists of a buyer (holder) and a seller (writer), and the number of contracts on both sides contribute to the overall Open Interest.
The Significance of Open Interest in Options:
- Market Participation: Open Interest provides insights into the level of market participation for a particular option contract. Higher Open Interest suggests a higher level of market interest and activity, indicating potentially greater liquidity and tighter bid-ask spreads.
- Liquidity and Volume: Options contracts with high Open Interest typically have greater liquidity, making it easier for traders to enter and exit positions at desired prices. Higher Open Interest often corresponds to higher trading volume, indicating increased market activity and potential trading opportunities.
Call Open Interest:
When the open interest for call options increases, it is generally considered a bearish indicator. This suggests that more market participants are selling or writing call options, potentially indicating a belief that the price of the underlying asset will not rise significantly above the strike price of those call options.
In terms of price action, the increased open interest in call options can act as a resistance level. As the price of the underlying asset approaches the strike price of these call options, there may be a higher probability of resistance and potential selling pressure.
Put Open Interest:
When the open interest for put options increases, it is generally considered a bullish indicator. This indicates that more market participants are selling or writing put options, which suggests a belief that the price of the underlying asset may not decline significantly below the strike price of those put options.
In terms of price action, the increased open interest in put options can act as a support level. As the price of the underlying asset approaches the strike price of these put options, there may be a higher likelihood of support and potential buying pressure.
It’s crucial to analyze open interest alongside other technical indicators, market trends, and volume to gain a comprehensive understanding of market sentiment and potential price movements.
Change in Open Interest in Options
Change in Open Interest refers to the net change in the number of outstanding contracts for a specific option contract between two consecutive trading sessions. It indicates the change in market participation and sentiment over time.
The Significance of Change in Open Interest in Options:
- Market Sentiment: Tracking the Change in Open Interest provides insights into shifts in market sentiment. An increase in Open Interest suggests new positions are being created, indicating potential market strength and the possibility of a prevailing trend. Conversely, a decrease in Open Interest may indicate a reduction in market participation or a potential trend reversal.
- Trading Volume Analysis: Change in Open Interest can be used in conjunction with trading volume to assess the significance of price movements. Higher trading volume accompanied by an increase in Open Interest suggests strong conviction among market participants and reinforces the validity of price trends.
Put-Call Ratio (PCR)
The Put-Call Ratio is calculated by dividing the total open interest of put options by the total open interest of call options. It measures the relative demand for put options (bearish sentiment) versus call options (bullish sentiment) in the market.
Significance of PCR:
The PCR is used as a sentiment indicator, helping to gauge market sentiment and potential turning points. A high PCR suggests increased demand for put options, indicating bearish sentiment and a potential market downturn. Conversely, a low PCR suggests a higher demand for call options, indicating bullish sentiment and a potential market upturn.
Implied Volatility (IV)
Implied Volatility represents the market’s expectation of the future price volatility of an underlying asset, as reflected in the prices of options. It is calculated using an option pricing model and is expressed as a percentage.
Significance of Implied Volatility:
Implied Volatility helps traders assess the expected magnitude of price movements in the underlying asset. Higher implied volatility suggests greater anticipated price fluctuations, indicating potential trading opportunities. Lower implied volatility may indicate relatively stable price expectations.
Max Pain
Max Pain is a concept that refers to the price at which option buyers would incur maximum losses and option sellers would benefit the most. It is determined based on the open interest of different strike prices.
Significance of Max Pain:
Max Pain is used to understand the potential price levels where market participants would have the least incentive to exercise their options. It is believed that the market tends to gravitate towards the Max Pain price level as option expiration approaches. Traders use Max Pain to gain insights into possible support or resistance levels and adjust their strategies accordingly.
Leveraging the Nifty and Bank Nifty Option Chains
Explore the Nifty and Bank Nifty option chains and understand how to extract meaningful insights from them. Uncover the specific data points and contract details that can aid in making informed trading decisions.
Nitin Murarka’s Options Trading Strategy Video – Trending OI Strategy
Delve into an insightful video by Mr. Nitin Murarka, a renowned stockbroker and trader. Explore his discussion on an intraday options trading strategy, the valuable insights he shares, and the relevance of his experience in the financial markets.
The YouTube video of Mr. Nitin Murarka, “Intraday Options Trading เคเคฐเคจเฅ เคเคพ เคเค เคฆเคฎเคฆเคพเคฐ เคคเคฐเฅเคเคพเฅค” went viral. This was an options trading strategy discussion between Mr. Vivek Bajaj, co-founder, of StockEdge, Elearnmarkets with Mr. Nitin Murarka, a stockbroker and trader by profession. Mr. Nitin Murarka is someone with an incredible amount of experience in the financial markets. This is one of the simple and effective option chain strategies.
This video is dedicated to all our intraday traders and those who are aiming to be successful intraday stock traders. So there is no better person than Mr. Nitin Murarka to learn about intraday trading as he is running a huge proprietary trading firm.
In the video, he shared his firmโs own trading secrets with all of us, a secret that has made him huge multifold profits. The video starts with a brief introduction of Mr. Murarka where he talks about his journey in the stock markets. He also talks about his learnings from D. Agarwal, the head of SMC Global. He has tried and tested many strategies for Options trading, but will be sharing one of the most profitable Option strategies that his prop desk uses too!
The speaker will then discuss two important tools that he uses for trading in Options. He will make the strategy so simple that anyone can use such a strategy. There is no need for a trader to even have extensive Technical Analysis knowledge to use such a strategy. Simple techniques of trend lines and understanding Option Data will be enough.
Towards the end, the speaker will emphasize the importance of VWAP, or Volume Weighted Average Price. This indicator when coupled with Options Data will make a formidable trading strategy that would make profits 7/10 times according to Mr Murarka. The key here is to have patience and to adhere to the technique. So watch the full video above to find out the secret to a successful trading strategy.
OI Pulse – Best Options Analytics App Best Value
In this video, Mr Nitin Murarka used a tool for option data. We have made a similar tool in Microsoft Excel with auto-updating options data for Nifty and Bank Nifty. We have made this Option Chain Excel file FREE to download.
Free Excel Sheet Download for Option Chain Analysis
Gain access to a powerful Excel sheet designed for option chain analysis. Discover its features, functionality, and how it simplifies the process of analyzing options data. Leverage the auto-updating options data for Nifty and Bank Nifty to stay up-to-date with real-time information.
Download the excel from the below link. To avoid spam, the link will be visible only for logged-in Users. Sign up and verify your email (you will receive verification email from Nifty20.com) to gain the access.
You can also join our Telegram group as any technical issues related to this Excel are answered in the group and information related to the updated version of the file is also shared with all the group participants as and when available.
This Option Chain Excel not only has data as per the strategy defined by Mr. Nitin Murarka in Face 2 Face Video but many more advanced features.
Video Introduction to Free NSE Option Chain Excel
Follow the video link for a detailed explanation of the features of this Option Chain Excel
Some glimpses of auto-updating option chain Excel file:
Hope this article is useful for you. Do provide your opinions and suggestions in the comments below.
FAQs
Is Option Chain Excel free to use?
Yes, Option chain excel is free to use.
What data is available in Option Chain Excel?
The option chain Excel has data for Nifty, Banknifty and Finnifty. The Excel has data points like changes in OI Builtup, OI charts, Max Pain, PCR etc.
Is data owned by Nifty20.com?
This Excel is only for educational and informational purposes.
The data fetched in Excel is fetched using publically available websites and using the web scraping methods of MS Excel. The data provided is as is and we do not have any copyrights on the same and we don’t take responsibility for the data received and its accuracy. The use of data for any financial decisions is the responsibility of the individual and we are not responsible for any profit or loss incurred due to the use of this Excel and data.
I am a serious trader should I use this Excel for my trading decisions?
The use of data for any financial decisions is the responsibility of the individual and we are not responsible for any profit or loss incurred due to the use of this Excel and data. We recommend using professional services like OI Pulse or Stocksrin for more accurate and live data.
Use coupon code KAPIN15 to get a 15% discount on OI Pulse annual and 6 monthly plans.
Use coupon code COUPONSATHI25 to get a 25% discount on Stocksrin all plans.
