A Newbie’s Guide to Reading an Options Chain

The value of implied volatility in the Option chain is always in terms of percentage. In the image above, for the strike price, the IV for the Call option is 16.59 and the IV for a Put option is 13.59, and these are the expected movement in the prices of those Options. Volume is the number of contracts that have traded for that particular strike price. Just like Open Interest, the volume traded is the highest for contracts that are near At the Money Strike price and least for strike prices that are far away from At the Money contracts. Other factors impact the price of an option, including the time remaining on an options contract as well as how far into the future the expiration date is for the contract. For example, the premium will decrease as the options contract draws closer to its expiration since there’s less time for an investor to make a profit.

What Is a Synthetic Position in Options Trading?

A high number of open interest means that investors are interested in that stock for that particular strike price and expiration date. An options chain is a list of all available option contracts for a specific security, organized by expiration date and strike price. This book on Options Trading is a relatively short read, but the author has done an exceptional job teaching the readers how to trade options? It highlights that options do not fairly reflect the chances of the stock going up or down, and put/call parity can be exploited.

Decoding Options Chains

Overall, it is a definite read for someone who desires to explore the market with a limited risk appetite. Though option trading is not a risk-free method of investment, for women who have limited spare money to be utilized for investing, options trading can be a very lucrative method to make money. Undoubtedly it has been one of the popular books on options trading for many years. The new version of the book contains many new chapters to explain the recent dynamic behaviors of the market along with updated charts, statistics, and strategies. It starts with the basic concepts of option chain analysis books options and explains why a trader should look to trade in options when they have the choice of trading in other instruments (equity and futures).

It thoroughly explains the complex options investing topics in a very simple way. It also discusses how you can construct various classic options strategies and how these options work despite market movements. It covers hordes of business-tested tactics and proven techniques you can employ while investing in innovative and fresh options products. The author has provided many examples and exhibits that help you understand the power of each strategy.

1. These tools are kept in perspective for aspiring and professional traders, explaining a straightforward and accessible style.
2. The author has provided many examples and exhibits that help you understand the power of each strategy.
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Readers also mention that proper illustrations make understanding the reading and analysis easier. Put Call Ratio (PCR) is a tool that is used by traders to gauge and understand the overall sentiment of the market. Bearish views in the market can be expressed by buying a “Put” option and Bullish views can be expressed by buying a “Call” option. If a trader buys a 10 Call option contract of a particular price then the OI will go up by 10 and eventually when he squares off or sells those contracts, then the Open Interest goes down by 10 units. To calculate the IMI, the sum of up days is divided by the sum of up days plus the sum of down days, or ISup ÷ (ISup + IS down), which is then multiplied by 100. While the trader can choose the number of days to look at, 14 days is the most common time frame.

Like RSI, if the resulting number is greater than 70, the stock is considered overbought. When there is a strong visible uptrend or downtrend, momentum indicators will frequently show overbought/oversold readings. I’ve been an options trader for more than 20 years, and there’s nothing I love more than sharing my learnings with the greater community of traders. But it is a wonderful book if a person has a basic understanding of technical analysis. In this book, the author has used many such technical concepts to decide the direction of the underlying instrument and along with some firefighting examples, making this book a lethal combo for Indian traders. J.B. Maverick is an active trader, commodity futures broker, and stock market analyst 17+ years of experience, in addition to 10+ years of experience as a finance writer and book editor.

Placement of Data

This guide will take a leaf from the pros and radically change the entire philosophy toward building a robust and high-yielding portfolio. Firefighting is an excellent technique to manage and save our positions if the price moves in the opposite direction as compared to our original prediction. Anyone can generate some constant returns every month through options if they have an open mind to understand the basics of options. Customer Reviews, including Product Star Ratings help customers to learn more about the product and decide whether it is the right product for them. The Volume activity is the least as we go deep In the Money (ITM) or Out of Money (OTM) for both call and Put Options. And as we draw closer towards the At the Money (ATM), the volume activity is the highest for both call and Put options.

When put volume is higher than call volume, the ratio is less than 1, indicating bearishness. However, traders sometimes view the put-call ratio as a contrarian indicator, opting to trade against market trends in hope of an impending reversal. Let’s look at a few common indicators—momentum and others—used by options traders. Conversely, options with more time remaining until expiry have more opportunities for the stock price to move beyond the strike and be profitable. Real-time option chains can be found on most of the financial websites online with stock prices. These include Yahoo Finance, The Wall Street Journal Online, and online trading sites, such as Charles Schwab.