Question 1

What is an Option Chain?

Accepted Answer

Option chain is a list of all available option contracts for a stock or an index. It shows all call and put options contracts with details such as expiration, strike price, volume and price in a single frame. The strike price is at the centre and all data pertaining to calls and puts on the same strike are presented next to each other. Normally, the calls are on the left side of the option chain and the puts are on the right side of the option chain.

Traders use the option chain to understand the dynamics and the direction of price movements. It also helps to identify which options contracts are liquid and which are illiquid. Normally it helps the traders to evaluate the depth and liquidity of specific strikes. An option chain helps a trader with the following information and data.

Last Traded price
Bid price
Ask price
Ask quantity
Bid quantity
Implied Volatility
Open Interest
Change in Open Interest
Volume

Question 2

How to read data on an Option Chain?

Accepted Answer

Option Chain is a table that contains the most critical information you need to buy and sell options. An option chain lists data on calls and puts, underlying prices, strike prices, expiration, and moneyness.

Call option data is listed to the right of the table.
Put option data is listed to the left of the table.
Strike prices are listed on rows in the centre of the table.
Option chains may also have data on last traded price, open interest, volatility and Greeks.

Last Traded Price (LTP), Change in LTP: The last traded price is for the respective call option and put option. During market hours, this could change by the second. For strike prices that are deep out-of-the-money and thinly traded, this data may be stale. Often quoted with the LTP is the change in last traded price. This is the difference between the prior day’s closing price and the current price.

Open Interest (OI), Change in OI: The open interest is updated throughout the day as options are bought and sold to open, as well as bought and sold to close. The change in open interest for the day may be listed as well. The change in OI is based on the difference between the closing open interest value for the day before and the current value.

Volume: The volume represents the number of transactions for a particular call or put option contract. It is specific to the day. This value is updated throughout the day in real-time.

Implied Volatility: There is an implied volatility value associated with each call and put option. So, for each row of strike prices and each expiration date, there will be an implied volatility. We will cover implied volatility in depth in this chapter but this value is derived from the last traded price of the option. If an option hasn’t traded for the day- perhaps because it is deep out-of-the-money- there won’t be an implied volatility value for that particular option.

Option Greeks: There are several option Greeks including Delta, Gamma, Theta, Vega, and Rho. These values inform the trader how much the price of the option will change based upon another value changing. For example, delta tells the trader how much the option price will change if the underlying price changes and theta gives the value for how much the option price will change based on the passage of time. We will go into Greeks in more detail in later chapters

Question 3

What is Option Chain analysis?

Accepted Answer

Option chain analysis involves studying the various elements within the Option Chain to gain insights into market sentiment, potential price movements, and overall trading activity.

Question 4

What is volume in Option Chain?

Accepted Answer

The volume represents the number of transactions for a particular call or put option contract. It is specific to the day. This value is updated throughout the day in real-time.

How is the Upstox Option Chain better?

It is the only Option Chain you’ll need!

It’s power-packed with 10+ data points like PCR, Max Pain, OI Analysis, India VIX
You can make Option Chain your own by reordering or editing them as per your choice
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Can we use the Option chain through the app?

Yes, Option Chain is available on the Upstox app. Click on any stock or index and go to the ‘Option Chain’ tab.

How to get old Option Chain data?

You can get historical F&O Contract data from the Exchange website.

How is the Option Chain price calculated?

Data on the Last Traded Price on Option Chain is taken from the Exchanges.

Question 5

What is put-call ratio (PCR)?

Accepted Answer

The Put-Call Ratio, or PCR, is a metric that lets a trader understand the mood of the market. This metric is calculated by dividing the total open interest of put options by the total open interest of call options. If the ratio is higher than 1, then there has been bearish sentiment as there are more puts than calls opened. A trader could use this information as an indicator that the market may be oversold or soon-to-be-oversold which is a bullish sign. If the ratio is less than 1, then the opposite is true. To learn more about the Put-Call Ratio, you can read our lesson here.

Question 6

What is probability of profit (PoP)?

Accepted Answer

The probability of profit, or PoP, is the market's current likelihood of a particular strike being not only in-the-money on expiration, but in-the-money enough to cover the current cost of the option contract. For example, if the Nifty is trading at 20000 and a call for the 20100 strike is priced at ₹150. The PoP is the implied likelihood that the Nifty will move from 20000 to 20250 (or higher) on expiration. We arrive at the value of 20250 by taking the strike of 20100 and adding the cost of ₹150. If you traded this contract, the option will be in the money once it moves above 20100 but will only be profitable once it moves enough to cover the cost of entering the position.

Question 7

What are the Greeks?

Accepted Answer

Option Greeks are data points that provide a trader with insights about the option's price sensitivity to certain parameters. The value of an option contract is impacted by the change in the underlying's price, change in time until expiration, change in volatility of the underlying, and change in interest rates. The five primary greeks are Delta, Gamma, Theta, Vega, and Rho. Delta tells you approximately how much the option's price will change for a R1 increase in the underlying. Gamma is approximately how much the delta will change for a R1 increase in the underlying. Theta is approximately how much value the option will lose if you hold the contract overnight. Rho is the approximate change in option price for a 1% increase in interest rates. To learn more about option Greeks, you can view our UpLearn content here.

Question 8

What is implied volatility?

Accepted Answer

Implied Volatility or IV is the market's forecast for future volatility of the underlying. Volatility is price movement. A stock whose price moves very little has low volatility. A stock that moves drastically on a regular basis has high volatility. The number quoted is an annualized number. If the IV is 15% for one stock and 10% for another, then the market is expecting the stock with a 15% IV to move more in the future. To learn more about volatility, you can review our UpLearn content here.

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Make Option Chain your own

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Getting Started With Option Chains

Want to read instead?

Getting Started With Option Chains

All about Max Pain

5 things you must know about Open Interest

Introducing the option chain: Unlock the power of the four Greeks

5 things to know about implied volatility

Reading an Option Chain? Here are 7 key terms you should know!

3 things to know about the PCR

Top traded options with Upstox

NIFTY 50

Nifty Next 50 Share Price

Nifty Bank Share Price

Nifty 100 Share Price

Nifty 200 Share Price

Nifty 500 Share Price

Nifty Midcap 50 Share Price

Nifty Smlcap 50 Share Price

India Vix Share Price

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