🔗 1. What is an Option Chain?
- A table showing Call (CE) and Put (PE) options for a stock or index
- Includes Strike Price, Open Interest (OI), Volume, Premium, etc.
- Shows sentiment and possible reversal/expiry zones
🧠 2. Key Terms in Option Chain
| Term | Meaning |
|---|---|
| Strike Price | Price level of the option |
| LTP | Last traded premium |
| Open Interest (OI) | Total active contracts |
| Change in OI | New positions added or exited |
| Volume | Contracts traded today |
| IV (Implied Volatility) | Market expectation of volatility |
| Premium | Option price (value) |
📊 3. How to Read Option Chain
For Nifty/BankNifty:
- Calls (CE) are on the left, Puts (PE) on the right
- Strike prices listed in the middle
- Focus on:
- Highest OI in Calls → Resistance
- Highest OI in Puts → Support
🧮 4. Interpreting Market Sentiment
| Observation | Meaning |
|---|---|
| High CE OI @ Strike | Resistance Zone |
| High PE OI @ Strike | Support Zone |
| PE OI > CE OI | Bullish Bias |
| CE OI > PE OI | Bearish Bias |
| Sudden spike in OI | Strong action / interest |
🔁 5. Change in Open Interest
- Positive Change in CE OI = Call writing (bearish)
- Positive Change in PE OI = Put writing (bullish)
- Unwinding in CE = Short covering (bullish)
- Unwinding in PE = Long unwinding (bearish)
🧾 6. Put-Call Ratio (PCR)
- Formula: Total PE OI / Total CE OI
- PCR > 1 = Bullish market
- PCR < 1 = Bearish market
- Extreme PCR (e.g., >1.8 or <0.7) → market reversal likely
🔄 7. Using Option Chain for Trade Decisions
Example:
- Nifty Spot: 22,000
- CE OI Highest @ 22,500 → Resistance
- PE OI Highest @ 21,800 → Support
➡️ Market likely to stay in this range
💡 8. Live Example Analysis (Nifty/BankNifty)
You can do:
- Pre-market or live-market Option Chain analysis
- Use NSE Website or Sensibull / Opstra / StockMock
- Highlight where big players are betting
🧱 9. Combine with Technical Analysis
- Confirm option chain signals with:
- Candlestick patterns
- Support/resistance on charts
- RSI/VWAP or trendlines
📚 10. Derivatives Analysis: Futures + Options
- Futures OI Rising + Price Up = Long buildup
- Futures OI Rising + Price Down = Short buildup
- OI Falling + Price Up = Short covering
- OI Falling + Price Down = Long unwinding