Option Chain

How do you analyze an option chain?

To analyze an option chain effectively, start by identifying the current market price in the center of the chain. Focus on analyzing open interest (OI) and OI change data to understand market direction based on recent changes. Our tool makes this easy with color-coded indicators and automatic pattern recognition that identifies Long Buildup, Short Cover, Short Buildup, and Long Unwinding patterns with strength indicators.

Pay attention to Put-Call Ratio (PCR) values, which are highlighted in different colors based on sentiment thresholds. Use the premium skew chart to visualize how option premiums vary across strikes, which can reveal market expectations. The historical replay feature allows you to study how these patterns evolved throughout the trading day, providing deeper insights into market behavior.

What does Nifty 18000 CE mean?

Nifty 18000 CE refers to a Call Option (CE) on the Nifty index with a strike price of 18,000. When you purchase this option, you're buying the right (but not the obligation) to buy the Nifty index at a price of 18,000, regardless of how high the actual index moves before expiration. One lot of Nifty options typically contains 50 units.

How to read OI data in option chain?

Open Interest (OI) data in our option chain shows the number of outstanding option contracts for each strike price. In our visualization, OI is displayed as horizontal bars for both calls and puts, making it easy to compare across strike prices. Longer bars indicate higher OI relative to other strikes.

To analyze OI effectively:

• Look for strikes with unusually high OI (longer bars)
• Compare OI between adjacent strikes to identify concentration
• Monitor changes in OI (color-coded in our chain)
• Use the time replay feature to see how OI evolved throughout the day
• Pay attention to the automated interpretation which identifies patterns based on OI changes

Increasing OI with rising prices signals bullish momentum, while increasing OI with falling prices indicates bearish sentiment. High OI at specific strikes often indicates important support/resistance levels that can influence price action.

What if put OI is high?

High put Open Interest (OI) can indicate several market conditions:

• Bearish Sentiment: Traders may be expecting price declines, leading them to buy puts for directional speculation
• Hedging Activity: Long-term investors might be buying puts to protect existing portfolios
• Support Level: High put OI at specific strikes might act as support levels as option sellers try to defend their positions
• Volatility Play: Traders might be expecting increased volatility rather than directional movement

Our options chain makes it easy to identify high put OI with the visual bar representation, and the PCR (Put-Call Ratio) column provides additional context. PCR values above 1.5 are highlighted in green, indicating potentially bearish sentiment or significant hedging activity.

How to read IV in option chain?

Implied Volatility (IV) represents the market's expectation of future price movement and directly impacts option premiums. In our options chain, IV is displayed as a percentage for each strike price for both calls and puts.

When analyzing IV:

• Compare IV across different strikes to identify volatility skew (differences in IV between OTM calls and puts)
• Look for strikes with unusually high or low IV compared to nearby strikes
• Track IV changes during the day using our replay feature to understand how market events impact volatility expectations
• Higher IV generally indicates greater expected volatility and results in higher option premiums
• Lower IV indicates less expected volatility and cheaper option premiums

IV analysis is particularly valuable for options selling strategies where you might look to sell options with elevated IV.

When to buy CE and PE?

When to buy Call Options (CE):

• When you expect the underlying asset's price to rise significantly
• When you want leveraged exposure to upside potential with limited risk
• When bullish patterns appear in the options chain, such as "Long Buildup" in calls or "Short Cover" in puts
• When PCR (Put-Call Ratio) is low (below 0.5), indicating bullish sentiment
• Before expected positive catalysts like earnings reports or product announcements

When to buy Put Options (PE):

• When you expect the underlying asset's price to fall significantly
• When you want to hedge existing long positions against downside risk
• When bearish patterns appear in the options chain, such as "Short Buildup" in puts or "Long Unwinding" in calls
• When PCR is high (above 1.5), indicating bearish sentiment
• Before potentially negative events or in anticipation of market corrections

Our options chain helps identify favorable entry points by automatically recognizing these patterns and providing visual indicators of market sentiment through the PCR column and OI distribution.

How to find if the market is bullish or bearish?

Our options chain provides multiple indicators to determine market sentiment:

• Put-Call Ratio (PCR):
  • PCR > 1.5 (highlighted in green): Potentially bearish sentiment
  • PCR < 0.5 (highlighted in red): Potentially bullish sentiment
  • PCR between 0.5-1.5: Neutral sentiment
• OI Patterns (automatically identified):
  • "Long Buildup" in calls: Bullish
  • "Short Cover" in calls: Bullish
  • "Short Buildup" in puts: Bearish
  • "Long Unwinding" in puts: Bearish
• OI Distribution:
  • High call OI above current price: Bullish expectations
  • High put OI below current price: Bearish expectations

The historical replay feature allows you to see how these sentiment indicators evolved throughout the trading day, providing deeper insights into market direction and potential turning points.

What is the straddle strategy?

A straddle is an options strategy involving the simultaneous purchase (or sale) of both a call and put option with the same strike price and expiration date. This strategy is used when a trader expects significant price movement but is uncertain about direction.

Our options chain includes a dedicated "Straddle" column that displays the combined value of the call and put at each strike price. This makes it easy to:

• Quickly assess the cost of implementing a straddle strategy at different strike prices
• Compare straddle values across the chain to identify where the market expects the most volatility
• Track changes in straddle values over time using the replay feature

The straddle value is particularly useful for volatility-based trading strategies where you're more concerned with the magnitude of movement rather than its direction.

How can I use the historical replay feature?

Our unique historical replay feature allows you to analyze how the options chain evolved throughout the trading day, providing valuable insights into market behavior and improving your trading decisions.

To use the replay feature effectively:

• Basic Navigation:
  • Click the play button to start the replay
  • Use the pause button to stop at interesting points
  • Adjust replay speed (0.5x, 1x, 2x, 4x) as needed
  • Drag the timeline slider to jump to specific time points
• Identifying Key Market Turning Points:
  • Track sudden changes in OI, volume, or prices
  • Note when interpretations change (e.g., from "Long Buildup" to "Long Unwinding")
  • Observe how the market reacted to specific time periods or events
• Strategy Back-Testing:
  • Mentally apply your trading strategies at different time points
  • See how they would have performed as the day progressed
  • Identify optimal entry and exit points

The replay feature is particularly valuable for post-market analysis, helping you improve your trading strategies by learning from historical price action and option chain dynamics.