So welcome back guys, in today's class, once again, I'll be taking you to the Learn app guys
where they will teach you how to analyze the option chain? And they will analyze the option
chain using the free tools like NSE website https://www.nseindia.com/option-chain, or you can also do it from your Zerodha terminal.
So guys, I'll take you to the Learn app class on how to analyze the option chain like a pro and
if you do not have the Zerodha account, because they will take you to your Zerodha account. So if
you do not have Zerodha account. I'll be leaving the link to join Zerodha in the video description
and also this is a free Learn app class. But Learn app also has their own courses. So if you want to
join Learn app courses, don't worry, I'll give you the link to join Learn app courses also in
the video description. So from there you can join Learn app and you can get more information on
trading. So guys I'll be taking you to the Learn app class on how to analyze the option chain.
But before that, if you are not yet subscribe to me in Youtube, this is the time to subscribe
to this channel first. ( Hit the bell icon and subscribe tyo this channel)
Hello guys, welcome to Learn app workshops. So today we are going to look at a very interesting
topic. It is one of my personal favorite and I use it, use it regularly for trading that is option
chain. So we will be looking at what options chain is? And everything in the detail. So basically
a quick start about Learn app. Guys Learn app has around 250000 plus monthly active learners,
just like you and me and there are around more than 250 plus courses and live classes and yeah,
everything is in a structured way. If you are a trader investor, everything is structured and I
guess if you are in this workshop You are into trading or you're planning to be a trader. Yes,
we have a very good structure for it and guys know your mentor. I am Bharat I love options
trading. I do love it like anything. And then if it all there is a risk management
that's like, if it all is a holy grail in market that is risk management and cutting losses. So
most of you guys would have known what happened to a IRTC. In the last one odd hours. So if at all,
someone didn't cut their losses or booked small losses and if, they had taken position intraday,
then it would have been a bit dicey day for them and yeah, guys, I'm a, I'm a learner like everyone
and currently I'm learning all about machine learning and guys about this workshop, it is
a little advanced workshop that basically we are, we are assuming you know, what
options are? Because that will make the process very easy. But still I will try to make it very
simpler and then recording would be provided and if it all, you have any doubts,
you mark all attendees and panelists, and there will be Q&A section at the end
and Guys, this all other topics which we will be looking at, it's all about option chain.
Option chain in detail. So basically we would be reseeing the construction of option chain.
Then we will be reading option chain, identify liquid stock trend position building bill
using option chain and maybe smartly we will like to take some trading decisions.
So guys promise, you will know what option chain is by the end of this workshop and
that's all and also this is a standard disclaimer. That's like charts shown
here are for educational purpose and please don't take anything as trade recommendation.
We completely believe in this code that is like, give a man a fish. You feed him for a day,
teach a man to fish. You feed him for a lifetime and guys. Are you excited? It's my favorite topic
and I should see Chat's roaring and if at all, if it all you how a notebook pen in your hand,
please take a note of it. It would be very useful in your trading career.
Yes. Great guys. So guys, first of all, this is the explanation of option chain. But yeah,
I will just, mybe, t to, try to say what exactly it is? An option chain.
No, I'm not. So guess what are the two types of options available. You guys can
actually text and tell in the chat box, two types of options which are available.
Call, Put ,Yes. Great. That's great. So what we'll do is like one side, we will put as Call
the other other side we will put us Put. So we know right any underlying we take with Nifty,
Bank nifty or any F&O stocks. There are multiple strick price, multiple contracts. So for example,
in our case, let's take a stock. Stock can be X, Y, Z, which is trading at a 10. Just an example.
There would be multiple, which is trading at 15. So there would be multiple strick price
10, 20, 30, 40, sorry, 40 50 or 60. So let's assume now it's trading at 30. So basically
what happens is the current strip, which is trading at 30.
So this is the script which is trading at 30. So 30 would be
ATM. I believe this is something which we know. We, we are assuming we know this and
for call, this would be ITM. For put, this would be ITM and this would be OTM.
So by the way, this is how an option chain is constructed. Basically. It's very simple. One
side it's Call one side it's Put and all the strick price are in between, and the price,
which is trading that is an ATM. It is, this is actually an option chain, which we ourselves
have done it. So then what we will do is,then what we will do is, so guys, if at all this talk is
for, like, for example, in this option, chain 30 is the ATM.
We need to know two things. What is the price of the contract, right?
What is the price of the contract and what is the open interest built? So first understand
the price of the option premium price. That's basically, if you if you are planning to buy
for 30 and if at all 30 is trading LTP. We call it LTP last traded price. Last traded prices around
let's say 100. To make it a bit easier. So if it is 100 with wont be have it. Let's make it 14.
So if it is a 40, that is called LTP. That's like current treding price. So withso is that okay? One
sec, I'm getting some messages. That's like the slate lift on yours. What happened? Sorry. Okay
okay guys. Okay. So we need to see the pricing option pricing. So that will be seen by LTP
and then we also look at another criteria that is Open Interest.
So what is Open Interest? We will look at what Open Interest is. Open Interest is the
number of positions built in the market. That's basically, there are two for any contact to build.
There are two players, that's like an option buyer and a seller. When both of them come together,
one position is built, and this would also be mentioned here. So basically in the option chain,
which we have done, we saw there is two sites, a call and the put,
and then we saw ATM would be middle and then the all strick price laid out, then there would be two
things which would be looking at for put say. That would be an LTP and for for call center,
there would be an LTP. Then there would be a OI here and Open Interest here. So,
so yes, so basically this is how this is the complete option chain, which we are actually
looking at and how How does this look like?
So this, this looks like something like this. So basically this is something the NSE site.
I have put the NSE site also there. So can you see this particular area where the option contracts
name is, for example, if it is a Nifty, Bank-Nifty, Fin Nifty,
it would be mentioned here. If it is the symbol, that's basically any F&O symbol like HDFC Bank,
Relience or anything, which would be here and then options come with an expiring. That's
basically if it is a weekly option every Thursday or the if at all, there is a holiday on Thursday,
it would be the previous day and if it is a monthly, last Thursday of the month
would be the expiry date and then comes the strick price.Strick price is this particular
thing, which we saw right. This 10, 20, 30, 40, 50 60 in our option chain, which we can constructed.
So this is how this is, this was a basic nifty's option chain. So there are a lot of other things
let's understand what are they? And let's try to make sense out of it. So guys, so far any doubt,
okay. That's great.
That's, that's great. That's great. So guys, if you can see in this option chain we can
see this call put, and then there is this strick price thing and for example, on sec,
for example, here, nifty is trading at 18,500. So this particular area, this 2R near ATM. So
this is ATM. This is ITM. This is ITM. This yellowish color is ITM for call, ITM for put,
and this is OTM for put. This is OTM for call. So, hen we saw, he LTP. LTP is the last traded price.
That's basically, wat was the last price? The buyer and seller agreed and if at all,
one buyer and seller agreed that comes to this OI. OI is open interest. So then,
canging OI is also mentioned here. Changing OI is nothing but, wat was the change? If at all,
there was 10 position yesterday. What is the change in OI today? So it can be
positive or it can be negative. Can you see, there is a positive side here and there is a negative
side here. Then comes volume. Volume and OI kind of looks similar. But OI builds on like the
position. For the, every thing. That's like, there is one expiry date. Every OI would be different.
That's basically not different. Every time the OI will stack up. That's basically new position is
built up. The OI will increase. But volume is not. So concrete, like OI. It tells on intraday basis.
But it's like if at all this option had a hundred volume today. Tomorrow again, it will start from
zero, but open interest is not that case. If it has a hundred contracts today and tomorrow, if a
new contract is added, that's like open interest this goes up 101,102. It will go like this.
Then comes IV. IV is implied volatility,for now, let's not get into it currently.
We wouldn't be using it and then comes ask like bid quantity, bid price,
ask price, ask quantity. So bid quantity is how much quantity someone is, someone is
interested to buy for and what is the price they want to buy for? So it would be very
near to LTP. If it is very far from LTP, then it means this is not a liquid option.
Then comes ask price ask quantity. That basically means how much someone is actually, someone is
asking, asking for someone, is selling for someone is buying for. So bid ask is that and that's
exactly replicate replicated in put site also. So this is the basic construction of option, a option
chain. So from this, we can make a lot of sense. So guys in this, for example, in call site, which
option has a lot of which contract, for example, which contract has a lot of position built.
Okay. Selvi asked, can you explain the volume? A volume is basically how many options were traded
for that day. For example, today is a 19th October right. If at all hundred people had
got ptions today, it would be hundred. But OI will like, OI will continue for days, two days.
Okay. So yes, you guys are right. Most of you guys said in 18,500,
most contract is built. That is like 84,854 and in put side. What is the maximum contract built?
You guys can drop it in chat. What is the use of volume in analysis? We'll ask. Volume plays a
prevital role that's that's like if It all you are a option trader, or if you are an intraday trader,
if it all there is a lot of volume that basically means people are interested.
So with, th open interests, you can actually add another layer volume,
but that gets a bit complicated. For now just see two major things that is
price and OI, maybe once you master this price and OI part add volume to your filter also.
Okay. Jayanti says, please explain Open Interest. Okay. Jayanti Open Interest
is nothing but nothing, but how many contracts are built? That's basically
for example, 18,500 is the strick price and let's assume there is no OI at all and if it at all,
I want to, I want to get one strick, one contract of 18,500. What I will do is I will place a
bid. That is basically, I will say I am, I want the one lot of nifty is 50. I will say, I want one
lot of nifty. For say 102 and if it at all, one seller comes in and the order gets filled. That
basically means one contract is built and that one particular contract is called open interest.
So one open interest is built. So Jayanti is the part OI is clear. Okay. Then Nivas asked,
can we use OI to trade intraday, if possible. Can you explain to this fall in nifty or
IRCTC? Nivas yes. We, I, I personally use open interest also as a criteria. That's
not the only criteria. I layer it with other thing and then I use it for my trades also
sometimes,mostly are intraday. If you're getting into OI when income, so option, for sure.
You can. Okay. Krishna asks, how does one find out if particulars strick price in CE, PE of longs or
short based on OI and OI changes? Yes, we will. We will check,Krishna. We will come
to that also and then I, okay. Snehasish, says IEX also sharp fall in the last 20 minutes. Yes.
sir, please continue with that. Oky sure Aditya
We will do that and I guess if it all there is any other questions, we'll take it at the end.
Also guys, first as like identifying liquid state, liquid scripts. So guys,
what does this liquid script means? Anylike if you guys don't know it, maybetype No
or no. Okay. Let me tell you what is liquid script is? Basically if I want to get into
an option and I play as a buy order, and then if there is no sell, then that would be a problem,
right? This particular thing is called liquidity. Liquidity. Basically, if you get into the market
or you should be having enough of buyers and sellers together, and that is how we find that is
how we say, this is a liquid script, or non-liquid script a non-liquid script. So basically we,
we just look at,the bid ask spread. So what is bid-ask spread? We in our option
chain. We saw right on sec. In our option chain, we saw,we saw right. The price here is 78.90
and there is a next ask price of 79. So it is just in 20 paisa difference. Thats
fine.Lot Size of nifty is 50. So that's not a problem. But if it all stock, like for example,
IEX or something, for which the bid prices is, bit price is say hundred, and the ask price is 110,
that means you are already losing 10 points and the Lot size of IEX is 1250 just getting into that
contract, you are making a loss of 12,000 rupees. So this is a very critical thing. Most of us like,
even when I started, I used to trade a lot in illiquid script to understand I made mistakes.
Then I relearned and did this. So what what generally we should look at this? We should
look at the bid price for both bid and ask price. If it all the thing is very near, then it is a
good liquid script. This is one way, the another way is by looking at chart. So let's basically,
let's try to look at some chart and find what this is one sec. I will try to share my screen.
So for example, this is my terminal and let's say TATA Motors
Okay. Let's say I have TATA Steel.
TATA Steel Which is currently trading at 13,000, sorry, 1,366.
If you just go look at this chart. So basically you can go to lesser timeframe, maybe 10 minutes,
five minutes. Can you see if it is little smoother comparatively. So this basically gives us a rough
understanding that there's a lot of trading activity, which is actually happening here,
but if at all, let's try to go a little deep in the money or out of the money and
check how the liquidity or spread is. That's basically what we'll do is we'll go to 1600 CE
for October expiry. Again,since it is an October expiry, there is a lot
of,thing which is happening. But if you go here, can you see there is a lot of,
p and downs and there is a lot of gaps. So this actually means there is no liquidity at
that point of time and if at all, you're getting into any script. If you see this kind of model,
that basically means, his is not an ideal script to enter.
Okay. That's great. So Debasish is, is your doubt clear? I guess it's the same.
Okay. J&K what makes OI to go to negative value OI or OI change?
If it is OI change, OI change can go to negative value. Okay. Deepak okay. When you searched on
Zerodha, please repeat. So, okay. This is my Zerodha terminal and I am finding the script like
currently in Tata steel, which is trading at 1366. I'm going little away, thats like, I'm going
to the 1600 CE and in 1600 CE, I'm going little behind to see,,maybe around 2nd, 3rd of September
and this is what, this is how the screen looked like. That's basically there was,no liquidity at
all. Can you see, there is a gap that's basically there was no trading happening and suddenly price
going up down. So this is happening because of there is like no fill in the order. That's like
someone is bidding, someone is asking, but they are far apart. They bought the RM limit orders.
So it is not happening and that's how we identify illiquid,looking at the charts.
Yes, because it is OTM.See TATA Steel Is a very good. It's a very liquid liquid script. Maybe if
at all, you find some script. So guys in F&O, you guys reversal and tell Which script all you trade?
Okay. Ajay, actually, this is a candlestick chart. But basically why it is like this? Is because this
this perticular type it was very illiquide. So the candelstick looks very choppy.
So that's the, that's the very thing. That's very interesting thing.
Okay, guys, I is there, is there any audio issues which someone has pointed out?
No, that's great. That's great. Thank, thank you guys. Thank you guys. So guys by this weekend, we
can identify the liquidity of the script for sure. If you are trading at TATA Steel,
it, it is a little liquid script, comparatively.
Any, anything from Tata is basically a bit liquid I'm trying to find.
Okay. So this is how it looks. So let's go to our PPT and understanding that next thing.
That's basically the very part which most of you guys are waiting for. So we saw OI and LTP in our
option chain, which we made and with the help of these two metrics, we will say to identify the
direction of the trend. So guys a quick yes. If you guys are excited to look about it,
that's great. So, yes. So guys it's actually really simple and I will also tell you
how I took one trade, maybe in my Zerodha terminal. It is still there. I will, o,
it's like I have booked my profits, but yeah, that particular trade was actually taken, or
showing something to you. But yeah, it actually worked out. So when we, when we see,
when we see the price, which is going up and also the open interest, which is going up, so basically
what is happening, the price of the option is going up of options or also in future.
But this time we are looking at options, the price is going up, it's soaring high
and open interest is getting built. So that basically means long buildup. That assumes people
are expecting the market to go up and when for that, that can happen for any strick price.
But prefer like if at all, it is an ATM, it is really good and when long buildup really happens,
what happens is like almost everything would be a long buildup, long buildup everywhere
and when it is okay, then we will see the short side of it. That's basically when
open interest is rising and prices falling. That basically means someone is assuming
the price is going to fall and they're building their positions of short. So that basically means
short buildup and then comes long unwinding. We saw, right. Someone build that position after
the point of time they need to book profits. So what they do is they try to book a profit when
they feel it is overpraised or then they, when they have met their targets. And suddenly you
will see, you will see this board falling that's basically it was going up. Even this will fall.
Even this will fall. OI to see this in our option chain also, when this falls, that clearly means
this position is getting squired of. OI is also going down. So that means long unwinding is
happening. The people who have long options or on that particular strick price, they are exiting,
they are booking their profits. So then comes short covering show the shorts, which were built.
So that, that also needs to be booked, right? So,suddenly the price cuts going up and the OI
startS falling.So that is what the short covering means short covering. So basically,guys write
down this and if at all, you just, nderstand this process a lot. You can make a lot of difference.
So that basically means short covering. So guys, this, is these four
things clear? Long buildup long unwinding and short covering and short buildup.
Okay. Price of the underlaying. Okay. When it comes to,
if you are just looking at futures data, maybe you can look at a futures thing. Here,
you can look at this calls price up and put price up. To identify this particular strike price going
up or down and also you can you can look at the underlying data also. So both ways are fine.
I,, if at all, I am doing a positional basis. I look at the underlying and open interest bill,
if at all I am doing intraday I do this and I select a strike price accordingly.
How does open interest helps? So yes, open interest alone doesn't help. It needs to be
combined with price to make a interpretation. That's basically in this part, we see open
interest is going up and prices going up that clearly means people are going long in the market.
And there is one more thing. We saw this whole option chain. This whole option chain if it is
basically we have two participants by Buyer and seller, and this all option
chain is looked in the perspective of sellers and why sellers? Anyone.
Okay. Manjunath says, can you please show an example of how you choose
price based on OI? Okay. Yes. I will show you that, okay. Vinay says sellers, how more risk?
Yes. The first thing is sellers have more risk and the second part is selling has a lot of
probabilities to it. That's basically they make money most of the time
and then time DK like, we need Greek Greek factors. And if a told smart money wants to go
long, they will prefer future because of the Delta. Delta is positive plus one in futures.
But in options, it is very less, that's the very reason of option chain. Most of us look through
a seller's perspective and in sellers perspective it makes a lot of sense. So now,now we understood
how to look at an option chain that basically we should look it in the view of seller.
So if it is there is a 100 positions, builds here or else 1000 position build here, and if it all,
that is a 10 position in the put site. So what can happen? So this is the question guys. You can drop
in a comment and tell if it all in this particular option chain at 30strike price. There are 1000
people in call site and there are 10 people in put site. What can happen? Market can fall market can
fall. Yes, market will fall, fall sure, and that is what option chain tells. Option chain users,
This particular age, this age is what helps us a lot, and if at all, the reverse happen,
that is basically there is like this 10 and if at all, that is 1000. So what will happen now?
So now that he was bullish, moving the market. So exactly this is what happened,
and then when we see the change in OI with the with the OI and LTP and change in OI,
that basically gives us an age of,how much,like how much unwinding is happening and stuff,
slang,things like that. So that's what exactly what happened in IEX yesterday.
So IEX yesterday was screaming, bullish. So what happened is,for example, I, I will open the,
So basically I saw IEX I will open the open interest.
So this is IEX option chain where we can see on sec.
Okay. Pratush says, can you recommend some tools that can help identify the intraday position
built? For sure. Yes. We will look at that also, but this in itself gives a very good edge. That's
basically NSE website. This website, you can go and see what is currently happening? And almost
all the software, be it, any other third parties offer, they have a lag of some time, but NSE is
NSE gives the exact exact thing. So here, if you can see in open interest and chang in open
interest, people people have actually existing from here. So that was, that was actually seen
very well in live market and that's how,that's how we, we kind of make sense that,the price can, that
can be a small profit booking, which can actually happen and yesterday what happened was,there was,
lng buildup which clearly happened. That's basically what happened is
earlier. It was 1000 from 1000 yesterday itself, by the end, that's the last 15, 20 minutes,
this thousand turn to 20, 30, like like that it came very less, and,with this logic,
I, I tried,I did a assumption. This was one with it. I combined the other things. That's basically
price action, other data points. And I took this trade on IEX. So basically this
was my position and it was like a 10 minute state quickly. This was a learning trade,
which I wanted to show for you. But fortunately it works, and this is not the case, lways which
happens in market. So market can do anything crazy. So this is not to be expected in market,
but yeah. If you have this particular sense, that's like what long buildup is?
What short buildup is? What market is doing? You will get a different age over things.
So guysdo you have, Okay. How to identify the sudden fall in advance? Like it happened in IEX
okay. Sure Selvi then okay advance in IEX basically when the fall is happening,
you just look at the change in open interest. If at all, there is a change in open interest.
If there is a high change in open interest, the position builds in a building market
is getting reduced drastically in one site. The whole thing will look very skewed. So if
it is very skewed, that clearly means there is something very big, which is about to happen
and maybe you should have a look at the option chain when you are, if at all,
you are trading intra day and when you trade intraday, ou should be looking at which side,
the, it just who vales smart money is, and that will give you in tip. Even in IRCTC.
The same thing was actually absorbed that's basically, efore, like just before two minutes
before the price was actually falling. Option chain told that, tt is something wrong.
Okay. Okay. I mean, which part you want to understand?
Okay. One sec.
So yes, this is the board. So basically what happened is there were one sec. I will,
I will just clear this a bit.
What happened in IEX? And executive with this process, You guys can do alot.
So for example, this is ATM. I mostly look at ATM and also what's happening in OTM and ITM also,
but,mostly ITMs how liquidity liquidity issues,because of the bid-ask spread.
So what happened is in IEX that ATM site place initially had 1000 quantity. This, this,
this is just a reference number, but suddenly when the market was going, this 1000 started reducing,
this is OI, open interest. This open interest was reducing some 1000, it becomes 600 from 600,
it become 100. So this, this clearly means there is something very wrong.
Okay and this was a reason behind IEX going up. That's basically you guys said it right
before. Sometimes that's basically all the writers were exhibiting. That basically means
IEX is about to go up. It's about to give breakout
and identifying this pattern in data can give you all an extra edge? So that is what a IEX did.
IEX did from yesterday and today it hits the upper serkit. And by the end,
when it was starting to fall, what happened is the same thing happened in put site. So basically
put the ATM was 1000. So before the fall, it started falling down, that's basically when 200
that basically 600, 100 and suddenly when it falls like that, that basically means there is something
wrong and price can go down and that exactly is what happened in IEX. Is this part clear?
So a quick
subject, yes. It was a, it is a long and unwinding, which happened.
Can we predict market fall or job jump in for next day using OI? So basically don't do,ee if at all,
you are interested, never go naked in market. I'll always, o option spreads. So basically, tat is,
there is one interesting goes in learn app from, sesibilize founder, Abd Hussan. So he teaches us
how to actually, iniiate splits in market, andthe detail about what option chain ar?. So this is
the course, so I will never recommend anyone of you guys to go naked, always follow , and maybe,
maye after a point of time, when you gain enough experience, maybe if you are in market for
eight, 10 years and your shoulder about the market direction, maybe you can do anything, but if not,
never go naked, naked means buying a single leg. That's basically, if you are wearing this call
that is called naked, but if you wake up and you sell a higher call so that you define your risk,
that is called spreads. So, so tat, that is something which we all should be doing.
Okay. Jitin yes, I did took a naked position, but that was because I was super sure about what I was
doing and also I had a proper risk defined. So I follow my risk management like anything and if at
all, a market has taught me a hard way that if at all, I don't follow risk or maybe I have blown up
account in my past. That's the very reason we all grow, right. We all traders, we know the stages of
traders. So that's the reason I say, if at all, you're new in market, never go naked and even I
personally don't go naked at all. Very few times when when I am super sure I have a structure to my
trades. That's basically I taketake the complete technical analysis technical or charter saying,
then I look at indicators and then I look at data. Data is like one major data is option chain,
which I look at along with it. When I combine this all I make trades. So,o that's the thing and if
you want to learn technical analysis, so this is the, this is the course. It is from CMT Vishal,
Metta himself, who is actually teaching what technical analysis is, and then about
indicators you can learn here and also one more good news. That's basically this course, a more
courses are actually getting added in a very list pack. So there's a lot happening here.
One sec. So let's, we, we saw that in chart and so guys, there's a quick recap about what we
saw. Let's try to digest this only me for saw the construction of option chains. We saw two types of
options are there a call option and a put option. Then comes , the actually comes the underlying.
Then we saw,OI, LTP the price. Then we saw reading and option chain. That's basically what LTP is?,
What ask bid spread is?, hose all criteria in option chain. Then we saw how to identify liquid
stock. Then we saw a trend of the underlying that's basically. If at all, there is 1000 here,
that basically means there can be a market to go away. It can be bit difficult and there should be
someone want to force to break it and when things starting liquid things start to break this. That
is when the trend actually changes that basically gives us the position built thing, long buildup,
short buildup, long unwinding, short covering. Everything would be seen with this
option chain. Then we saw a trading decision. If at all there is a long buildup, we can go for
long spreads and if at all there is a short buildup, we can go for a bearish spread. So
I will not recommend anyone going naked. So guys that comes to a end of this workshop,
like end of this workshop, and also as always, the end is just the beginning of new world of trading.
So if at all, you have learned something. If you just move, what option chain is? Start
applying what you learn, maybe make note of what long buildup, what short buildup, long unwinding
everything is and then do absorb this in live market for some days and don't put all your money
tomorrow. Trading is very risky do check on your risk management part and also if at all, you need
additional edge about what options are and want to know everything about options. Maybe refer this
segment that's basically from basics of option, basics of options to do the strangle and straddle
and this goes for short. So this all will give you a perspective of what options completely is.
No comments:
Post a Comment