If you want to do options trading, then don't dive into the sea without swimming. Learn about the meaning of the 7 keywords related to the options chain. You can use the call option to buy the stock at a fixed price. If you think that the price of any stock or index is going to rise, then you will buy the call option and if you expect them to come down, then you sell the call option. Put option is a kind of insurance policy. You can use it to sell the stock at a fixed price. If you think the price of a stock or an index will go down then you will buy a put option. If you think that the price of a stock or index is going to rise then you will sell the put option.
Strike price is the price at which the stock has been agreed to sell or buy. In a nutshell, if the NIFTY50 is trading at 18,816, then 18,700, 18,800 and 18,900 figures which you see on your option chain are the strikes that you can trade as per your view.
Open interest means the total number of active options contracts. Open interest tells us where the buyers and sellers are committing. Traders can identify the support and resistance levels by looking at open interest.
PCR means Put Call Ratio and by looking at the PCR, one can know about the mood of the market. Basically, this figure divides the total open interest of put options from the total open interest of call options. By looking at the PCR, one can get a hint that the mood of the market is optimistic or not.
Max Pain is the strike price at which most options contracts become worthless. This is the point where the buyers have to take the most loss and the sellers have the most profit. Traders use it to predict the level at which the expiry can take place. Like food and drink, options contracts also come with an expiry date. This is the date after which options contracts become void, that is, it does not mean anything. Different options have different expiration dates to choose from.
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