9 April 2012

Nifty Option Chain


UNDERSTANDING NIFTY OPTION CHAIN

Many traders want to trade in options, but they find it difficult to chose between various strike price. Even if you are clear about whether you want to buy a call or put it seems difficult to select which one. Here we attempt to explain Option chain so that you can decide upon strike price.
To trade in options, we need to have following information with us
 a)    Underlying Security
b)    Option Type – CALL or PUT
c)     Contract Expiry
d)    Strike price
 Once you have all above information, you have unique identifier of the option contract that you can buy or sell in the market.
 On NSE homepage, there is link called Option Chain.  Option chain lists the available option contracts of an underlying security that are currently traded in the market.
The information is presented in tabular form as given below. If you are new to options trading then you will be confused with the amount of information present here.


Let’s look the pieces of this jig-saw puzzle in parts and understand them.
 The table below can be logically divided in two parts. Left part of table has information related to CALL options and right part of table has information about PUT options.
In the center, we have various strike prices for option contract arranged in ascending order.
 Expiry Date – This is the option contract’s expiry date. Various contract expiry that are traded in the market currently are listed here.
Open Interest - Number of open positions for a particular strike price.
LTP = Last traded price
Net Change – % change in the price at which a particular option is traded in market last, with respect to the closing price of previous trading day.
Volume – Number of contracts traded today
Bid Quantity – Quantity given in the last open buy order for this particular strike price.
Bid Price – Price given in the last open buy order for this particular strike price.
Offer Price – Price given in the last open Sell order for this particular strike price.
Offer Quantity – Quantity given in the last open Sell order for this particular strike price.
In other words, bid price indicate the price that buyers is wiling to pay to buy the option contract, and Offer price  indicates the price at which seller is willing to sell.
You can click on Quote link on a particular row to get the more details.
You might notice that part of the table has cells with coloured background. These cells indicate that those particular strikes are In-The-Money. The cells with white background are for Out-of The-Money strikes.

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