Before understanding the Nifty Option chain, you must first understand what Nifty is. NIFTY stands for National Stock Exchange Fifty which is an index on the NSE. This index represents all the stocks' total market value for a specific period. So Nifty is a market index known as Nifty 50, which shows the weighted average of the largest 50 Indian NSE listed companies. This is the NSE index, and SENSEX is the BSE Index that shows 30 companies that are financially largest limited to the Bombay Stock Exchange.
So, now the Nifty Option is a derivative where the Nifty is the underlying asset. To clear the understanding of the Nifty Option chain, you should know that the Nifty Option has a lot size 75, just like the Nifty Futures has a 50 lot size.
The trader needs to pay the Nifty Option premium upfront on the underlying asset's actual value. The Nifty option has multiple expiry periods and has different strike prices.
So let’s start Understanding Nifty Option Chain and how to analyse Nifty option chain, and what is Nifty option chain analysis is.
If you try to find out the nifty option chain analysis online on various websites, you may witness that all providers have different ways of representing the data on their Option Chain Page. But all of them use the exact data for the nifty option chain analysis. So there is nothing to get confused about as they have different ways to show the data to the viewers. Most people choose their website or portal for understanding Nifty Option Chain.
If it is the NSE website that you feel comfortable understanding Nifty Option Chain, then you will find the data aligned perfectly, but if you are new, it will take some time to make meaning out of the data. Besides NSE, other online websites provide different styles of representing the nifty option chain analysis data. These websites are listed below,
You will find many other websites that show the analysis of Nifty options. But to understand it better, you must know how to analyse nifty option Chain and what nifty option chain analysis software helps understand the data.
How to analyse Nifty Option Chain
The investors should know how to analyse nifty option chain because, as the investors, you need to understand what goes on behind the representation of the data and how the analysis happens. If you do not understand some of the things you do not know from the nifty option chain analysis software, you can find out by understanding how to analyse nifty option chain. Many newcomers struggle to interpret the data shown in the charts and tables and think that understanding about the Nifty Option Chain is challenging and is not their cup of tea.
But it is relatively simple to know about the Nifty Option Chain. First of all, you need to find out how the overall website works and what options it gives you to understand the data.
First, be clear about what kind of Nifty Option Chain data you are looking for. If you want to know about the Bank Nifty data, Fin Nifty data, or want to know Nifty data, then select the option accordingly.
You can then select a particular stock. Let's say if you want to know about the Nifty Option Chain of Astral company, then you can choose that stock.
Then you can find out the expiry from the choices given. Depending upon the Option Chain type you select, you will have the expiry dates like monthly or weekly.
You then need to select a strike price.
Almost every chart will have a common representation of the data of calls and puts. You will get Calls on the left side and Puts on the right side.
The Nifty Option Chain prices below the current strike prices will be known as the ITM or In The Money call options. The strike prices above the current strike price on the Call side will be known as the OTM or Out The Money call options.
The Nifty Option Chain prices above the current strike prices will be known as the ITM or In The Money put options. As the call option, The strike prices above the current strike price on the Put side will be known as the OTM or Out The Money Put options.
The strike price of the current stock in both the Call option and Put option will be considered as ATM or At The Money.
The Ask price represents the price at which the sellers are ready to sell the call option, and the Ask quantity is the number of nifty lots. The Bid price is the buyer's price at which they want to buy the nifty lots.
If you see the NSE charts, there will be an LTP or Last Traded Price given in the charts, which is the price they agreed to trade. The IV in the charts is Implied Volatility, and the CHNG is the difference between the current price and the stock traded previously.
The nifty option chain will show the total number of securities traded if it is used with open interest. It will show the securities that have changed in a day's trading cycle.
Consider the below indicators for the Open Interest,
If the stock price and Open Interest both are rising, then the Market is considered as a strength in the market or how strong the market is
If the stock price increases and the open interest decreases, the market strength decreases or weakens.
If the stock price decreases while the open interest increases, then the market is not good.
If both the stock prices and open interest decrease, the market is building itself.
Different platforms will have different tabs available, and the investor needs to understand them before using the data.
Nifty Option Chain analysis software
There are many nifty option chain analysis software available for the investors that also provide
nifty option chain with delta information.
Usually, the nifty option chain with delta measures how options premium changes with the movement of underlying stocks. As the value of the options changes the option premium also changes. The changes in the spot value will affect the options premium value.
If you analyse the nifty option chain with delta, you can capture the movement of the option premium change with respect to the underlying asset. The nifty option chain with delta is helpful in both call options and put options.
It is helpful to know the Nifty Option Chain to analyse the stocks movements and the right one to invest in. The charts shown on various websites help investors make the best decision that earns the m profit. But there are several software available in the market that helps the investors analyze Nifty Option Chain for both calls and put.