Like the Bank Nifty Options Chain, the NSE Option Chain consists of call and put options. It is also divided into two sections, the upper and the lower sections, and each section contains several columns. Here’s what each column represents:
- Option type: This indicates whether the option is a call or a put option.
- Strike price: This is the price at which the option can be exercised. It can vary by 50 or 100 rupees.
- Last traded price: This is the price at which the last trade occurred for a particular contract.
- Change: The price change from the previous session’s closing price.
- Volume: Volume is the total number of contracts bought or sold for that particular strike price and expiration date on that trading day. It helps investors understand the interest in a particular contract.
- Open interest: The number of contracts that remain open after executing all trades for a given period.
Different types of options available in the NSE Option Chain
There are two types of options available in the NSE Option Chain:
- American options: American options can be exercised at any time before the expiration date.
- European options: European options can only be exercised on the expiration date.
How to use NSE Option Chain for Stock Market Trading
When using the NSE Option Chain for trading, you need to keep an eye on both the open interest and implied volatility columns. These two indicators provide critical insights into traders’ interest levels and the stock’s likely volatility levels over the short term.
You’ll also want to pay close attention to any significant price movements in the last few sessions. Understanding the price change can help you decide if you should sell the stock. If you see that open interest in a call option is low, it may indicate that there is relatively less demand for that option at that specific point in time.
Comparing the Bank Nifty Options Chain and the NSE Option Chain
Option chains have unique features and implications for traders. Bank Nifty Options Chain provides insights into the banking industry’s performance, while the NSE Option Chain displays contract details for all available options on the NSE.
Traders must closely monitor the open interest and implied volatility columns in both the Bank Nifty Options Chain and the NSE Option Chain. However, whereas the Bank Nifty Options Chain has dedicated options to buy or sell banking stocks, the NSE Option Chain does not.
Advantages and Disadvantages of Bank Nifty Option Chain and NSE Option Chain
One of the main advantages of using the Bank Nifty Options Chain is that it’s an excellent tool for insight into banking industry performance. It provides a more detailed breakdown of who is involved and in what proportions. Open interest, volume, and implied volatility are the essential parameters to look at while analyzing the market in an option chain.
Alternatively, the NSE Option Chain represents all available options on the exchange. It provides an unparalleled feature to investors’ trading strategies with respect to typing specific characteristics. Its major drawback is that it does not factor in any specific group of stocks when analyzing the data it presents.
Which is the Best Option Chain for a Novice
If you’re a novice, both the Bank Nifty Option chain and the NSE Option chain can be daunting as they both require some stock market knowledge. To start, learn about the basic terminologies regarding options trading, strategies, and the market in general.
Expert traders, on the other hand, will have a more nuanced trading strategy specific to their goals. So, it completely depends on their investment objectives, for example, their portfolio diversity in stocks.
Conclusion
Unsurprisingly, the Bank Nifty Options Chain and NSE Option Chain are two vital tools that traders must understand to succeed in the Indian stock market. A deeper study of the options chain allows investors to make informed trading decisions and maximize profits. Follow the guidelines presented here to understand the essential parameters of both option chains. This will enable you to identify the risks involved in a trade, and ultimately make the right trading decisions.
