Demystifying NSE Option Chain: Your Gateway to Options Trading Success

NSE Options Chain shows a list of all the call & put options strike prices with their premiums for a given expiry. It is one of the most important leading indicators as it depends on so many variables like Open Interest (OI), Change in OI, Implied Volatility (IV), Premium, Premium Decay for each strike price closer to the current price of underlying.

We are trying to simplify the Option Chain analysis for traders by making it easy to interpret. The option chain on niftytrader shows the position of option writers and option buyers - this will show the points of strength and weakness for the market and the position of option writers.

What is the NSE Option Chain?

The NSE (National Stock Exchange) Option Chain is a powerful tool that provides a snapshot of available options contracts for a particular underlying asset, such as stocks or indices. It displays a matrix of option prices, strike prices, and expiration dates, allowing traders to visualize the various options available for trading.

Components of the NSE Option Chain:

1. Strike Prices: The NSE Option Chain lists different strike prices, which represent the predetermined price levels at which the underlying asset can be bought or sold if the option is exercised. These strike prices are typically displayed in ascending order, with "In-the-Money," "At-the-Money," and "Out-of-the-Money" options grouped accordingly.

2. Expiration Dates: Each options contract listed in the NSE Option Chain has an expiration date, indicating the last day on which the option can be exercised. These expiration dates can range from weekly to monthly, providing traders with flexibility in their trading strategies.

3. Option Prices: The NSE Option Chain displays the prices of various options contracts, including the bid price (the price buyers are willing to pay) and the ask price (the price sellers are asking for). These prices fluctuate based on factors such as market demand, underlying asset price movements, and implied volatility.

How to Interpret the NSE Option Chain:

Understanding how to interpret the information presented in the NSE Option Chain is crucial for making informed trading decisions. Here's a step-by-step guide:

Identify the Underlying Asset:

Start by selecting the underlying asset you're interested in trading options for, whether it's a specific stock, index, or ETF.

Analyze Strike Prices:

Examine the various strike prices listed in the Option Chain and identify key levels of support and resistance. In-the-Money options may have higher premiums but offer greater profit potential, while Out-of-the-Money options are cheaper but carry higher risk.

Evaluate Expiration Dates:

Consider the expiration dates of options contracts and choose a timeframe that aligns with your trading strategy. Short-term traders may prefer weekly options for quick profits, while long-term investors may opt for monthly options for greater stability.

Review Option Prices:

Compare the bid and ask prices of options contracts to gauge market sentiment and liquidity. Narrow bid-ask spreads indicate active trading activity and tighter pricing, making it easier to enter and exit positions.

Strategies for Trading NSE Options:

Now that you understand how to interpret the NSE Option Chain, let's explore some popular strategies for trading options:

Covered Call:

This strategy involves selling a call option on an underlying asset you already own. It allows you to generate income from the premium received while potentially profiting from the appreciation of the underlying asset.

Protective Put:

In this strategy, you purchase a put option to hedge against potential downside risk in a stock you own. If the stock price declines, the put option will increase in value, offsetting losses in the underlying asset.

Straddle:

A straddle involves simultaneously buying a call option and a put option with the same strike price and expiration date. This strategy profits from significant price movements in either direction, regardless of market volatility.

Calls:

1) OI increasing & Option Price Increasing --> Call Buying (Bullish)

2) OI increasing & Option Price Decreasing --> Call Writing (Bearish)

3) OI Decreasing & Option Price Increasing -->  Call Short Covering (Bullish)

4) OI Decreasing & Option Price Decreasing --> Call Long Covering (Bearish)

Puts:

1) OI increasing & Option Price Increasing --> Put Buying (Bearish)

2) OI increasing & Option Price Decreasing --> Put Writing (Bullish)

3) OI Decreasing & Option Price Increasing -->  Put Short Covering (Bearish)

4) OI Decreasing & Option Price Decreasing --> Put Long Covering (Bullish)

NSE Option Chain FAQs:

Who is an option writer? 

The option writer is a trading member who is permitted by the F&O segment of the exchange to write options contracts. Option Writer has obligation to honor the contract and they receive a premium for that.

Who is an option Buyer? 

Option Buyer is a person who has the right but no obligation. 

What is “in the money” strike price? 

For put options - it is the strike price of the option contract which is above “at the money” or “near the money” strike price. 
For call options - it is the strike price of the option contract which is below “at the money” or “near the money” strike price.

What are the “at the money” or “near the money” strike prices? 

"At the Money" or "Near the Money" strike price are those options contracts that have the strike price very close to the underlying price (spot price or the last traded price of the Index or security).

What is an “out of the money” strike price? 

"Out of the Money," strike price are those options contracts that have the strike price far from the underlying price (spot price or the last traded price of the Index or security).

What is a premium? 

Premium is the price that the buyer of the option pays to the seller of the option for the rights conveyed by the option contract. 

What is a long position? 

A long position in a derivatives contract means outstanding purchase obligations in respect of a permitted derivatives contract at any point of time.

What is a short position? 

A short position in a derivatives contract means outstanding sell obligations in respect of a permitted derivatives contract at any point of time. 

What is open interest? 

It is the total number of derivatives contracts of an underlying security that have not yet been offset and closed by an opposite derivatives transaction nor fulfilled by delivery of the cash or underlying security or option exercise. 

For the calculation of open interest, only one side of the derivatives contract is counted. 

What is strike price interval? 

It is the gap between any two successive strike prices which the relevant authority may prescribe from time to time.

What is a contract month or contract week?

It is the month or week in which a contract needs to be finally settled, as decided by the stock exchange. 

What is contract value?

It is the value arrived at by multiplying the strike price of the options contract with the regular/market lot size. 

What is the settlement date? 

It is the date on which the settlement of outstanding obligations is required to be settled.

What is F&O lot/market lot size? 

It is the number of units that can be bought or sold in a specified derivatives contract. 

What is the last trading day/expiry day? 

It is the day up to and on which a derivatives contract is available for trading. It is normally the last Thursday of the month. If the last Thursday is a holiday, the expiry will happen on Wednesday.
 

How to read option Chain data in NSE?

NSE Option chain is closely monitored by day traders to identify support and resistance levels, which they confirm with other indicators before placing a trade.

How to read the options chain (equity derivatives)?

On the option chain page, you will find 2 columns - one on the extreme right and the other on the extreme left. These 2 columns try to analyze the behavior of option buyers & sellers on all strike prices. For the sake of simplicity, it has been color-coded with GREEN and RED background so traders can easily read it.

What is an option Chain? What does Option Chain mean?

An Option chain is a tabular representation of all available option contracts for an underlying (stock, index, currency or commodity) and provides a quick picture of all available put options and calls options of the underlying along with their pricing, volume, open interest details, which could be advantageous for a trader to analyze the market and take appropriate and immediate actions. Option chain allows you to see all options (Put & call) for a particular strike in a single page view so you can analyze it.

What is option chain analysis?

Traders use the Option chain as a complementary tool along with the study of market technicals or chart patterns. It can offer very useful clues to traders especially the day traders.

What is IV in Option Chain?

IV stands for Implied Volatility.

How to download option chain data from NSE?

You can directly download the option chain data from the NSE website in an excel sheet. There are various excel tools available on the internet to freely download the NSE Option chain data and analyze it. This data can be delayed by a few minutes. 

We recommend traders use the niftytrader website and app for option chain analysis. You can also get in touch (email: care@niftytrader.in) with us to incorporate any specific analysis on the option chain - our technical team will review the suggestion and try to incorporate it for the benefit of all traders.

Check out Live Put & Call Options Quote: Find all details related to selected options here. You can use the filter to change the Expiration date, Option type i.e. Call & Put option & Strike Price. It will show detailed data related to your selection for analysis.

What is exercise style? 
The exercise style of an option refers to the price at which and/or time as to when the option is exercisable by the holder. It may either be an American style option or a European style option or such other exercise style of option as the relevant authority (stock exchange) may prescribe from time to time.

What is a European-style option contract? 
A European-style option contract is an option contract that may be exercised on the expiration day on or before the expiration time. 

What is an American-style options contract? 
American Style option contract is an option contract that may be exercised any day before the expiration day or before the expiration time.