Trading in options can be complicated. Unlike stock trading, where you only need to factor in the stock price and some technical or fundamental indicators, options trading requires a more in-depth analysis of the various metrics associated with an option contract. They include the general put-call ratio, the strike price of the scrip you’re interested in, its last traded price, open interest and more.
Understanding what these metrics indicate is one thing. But tracking them all in one place when the markets are rapidly changing is practically impossible, especially if you do not have a one-stop solution that reveals all these insights at a glance.
In other words, you need an advanced options chain — and Samco Securities, India’s leading technology-driven brokerage partner, has ensured it’s available free of cost for traders in the Samco trading community.
Decoding Options Chains: What are They and What Do They Tell You?
An options chain is a comprehensive listing that displays all available option contracts for a given underlying security. It helps you understand the range of options available for trading and gives you insights into the options market for a particular stock, index or exchange-traded fund (ETF).
In a typical options chain, you’ll find a range of data points about each option — like the type of option, its strike price, last traded price (LTP), open interest (OI) and more. Each of these details tells you a little bit about the option’s current trading dynamics and potential price movements in the future.
Let’s take a closer look at what each detail in a typical options chain indicates.
- Type of Options
Options can be any one of two main types: calls and puts. A call option gives you the right, but not the obligation, to buy a stock at a specific price called the strike price within a specific time frame. Conversely, a put option gives you the right to sell a stock at the strike price within a certain period.
These options can be used for various strategies, including hedging, speculation or even generating income via premiums. For instance, if you expect that a company’s share price, currently at ₹100, may rise in the future, you may buy a call option with a strike price of ₹110. Alternatively, if you expect its share price to fall, you may buy a put option with a strike price of ₹90.
- Strike Price
The strike price is the price at which you can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset. Options chains list options at various strike prices, so you can choose optimal trading strategies with a lot more flexibility. The strike prices listed are generally within a reasonable range from the current market price of the underlying asset.
For example, if a stock is currently trading at ₹50, the options chain may list call options with strike prices ranging from ₹45 to ₹55, giving you choices for different market outlooks like bullish, bearish or neutral. If the strike price of an option is ₹60, for instance, it means you can buy or sell the underlying at that price (for call and put options respectively).
- Last Traded Price (LTP)
The Last Traded Price (LTP) represents the price at which a given option contract was last traded. This price gives you an idea of the option’s current market value. For instance, if a call option with a strike price of ₹100 has an LTP of ₹12, it means the last trade for this option was executed at a premium of ₹12 per option.
- Open Interest (OI)
For each buyer of an option, there must be a seller, and the open interest (OI) reflects the aggregate of these positions. In other words, it indicates the total number of outstanding option contracts that are yet to be settled. Let’s look at an example to understand this better. If the open interest for the call options of a company with a strike price of ₹100 is 1,000, it means there are 1,000 contracts that are currently open and being traded in the market. This metric gives you some idea about how sought after (or not) a particular option contract is, so you can assess its liquidity better.
- OI Change %
This metric shows you the percentage change in the open interest (OI) from the previous day. So, it essentially indicates how many new contracts were opened or existing contracts were closed overnight. A positive change suggests that the interest or speculation has increased, whereas a negative change indicates that more positions have been closed.
- Volume
The volume refers to the number of option contracts traded in a day. A high volume indicates significant interest in an option. This often leads to better price discovery and higher liquidity. For instance, if the volume for a call option is 500, it means 500 contracts of that option were traded during the relevant trading session.
- Implied Volatility (IV)
Implied volatility tells you how much the market expects the price of the underlying asset to fluctuate over the life of an option contract. Usually expressed as a percentage, it is derived from the option’s price and reflects the market’s expectations of future volatility.
A higher IV basically indicates that the market expects a significant price movement in the underlying asset — which can, in turn, increase an option’s premium. For example, if a company’s ₹100 call option has an IV of 25%, it means that the market anticipates significant price fluctuation in the stock.
Samco’s Advanced Options Chain for Improved Trading Success
While you can find the above metrics in your average options chain, Samco Securities has gone the extra mile and integrated options Greeks into the Samco trading app, so you can view crucial metrics like the delta, gamma, theta and vega of an option contract within the option chain itself.
This advanced option chain in the Samco trading app significantly elevates your potential for success in the markets because options Greeks measure various factors that influence the price of an option and offer insights beyond the basic metrics included in standard options chains. Here’s how:
- The options delta indicates how much an option’s price is expected to change for a ₹1 move in the underlying asset. This makes it crucial for assessing directional risk.
- The gamma reflects the rate of change of the delta — effectively telling you how stable or not the delta is over time.
- The theta, on the other hand, represents the time decay of an option and quantifies how much value an option loses as it approaches expiry. This is vital for timing your strategies.
- Lastly, the vega measures an option’s sensitivity to the underlying asset’s implied volatility. It allows you to understand how changes in market volatility could affect the price of an option.
Enjoy Access to Advanced Options Chains for Free with Samco
Although options chains are extremely important for options trading, few platforms offer up-to-date data points at a glance. This means you may have to switch between different interfaces to gather a comprehensive picture of the market.
While there may be a few competitive platforms that offer detailed options chains for traders, they are typically available at a premium — which can be a massive deterrent for the average retail participant.
But Samco Securities has gone further ahead to ensure that all traders in its online trading community can access these pivotal metrics without any additional financial burden. By integrating these Greeks into the options chain and providing valuable insights free of cost, Samco is changing the face of F&O trading in India and empowering traders to make more nuanced decisions, thus potentially improving trading success.
