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Option chain analysis

Analyzing the option chain to predict market direction and make profitable trades requires a mix of technical analysis and market sentiment assessment. Here are the most successful methods to analyze option chains for directionally focused trade detection:

1. Open Interest (OI) Analysis

  • Definition: Open Interest refers to the total number of outstanding contracts that have not been settled or exercised.
  • What to look for:
    • Rising OI with rising price: Indicates strength in the current trend, suggesting that the price is likely to continue in the same direction.
    • Rising OI with falling price: Indicates a possible bearish trend.
    • Declining OI with rising price: Suggests that the current trend may be losing momentum or is a false
… Read the rest

Big players game of futures and options for small players

 

Introduction

In the world of financial markets, big players often engage in complex strategies to maximize their profits. One such strategy involves selling options in the futures and options market. In this article, we will explore how these big players win by selling options.

Understanding Options

Options are financial derivatives that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified time period. When big players sell options, they are essentially taking on the role of the option seller or writer.

Generating Income

One of the main reasons big players sell options is to generate income. When they sell options, they receive a premium from the … Read the rest

Exiting of open interest of call options

Call options are an important tool in the financial market, allowing investors to profit from the rise in the price of an underlying asset. Open interest refers to the total number of outstanding contracts for a particular option. When traders exit their positions in call options, it can have significant implications for the market. Let’s explore the exiting of open interest of call options and its effects.

Understanding Open Interest

Open interest represents the total number of contracts that are still open or not yet closed or exercised. It provides valuable information about the liquidity and popularity of a particular option. When open interest is high, it indicates active trading and investor interest in that option. Conversely, low open interest … Read the rest

Stock selection for intraday

 

Introduction

When it comes to intraday trading, selecting the right stocks is crucial for success. One popular approach is to analyze open interest and identify support and resistance levels. In this article, we will explore how open interest can be used to make informed stock selection decisions.

Understanding Open Interest

Open interest refers to the total number of outstanding contracts in a particular stock or option. It represents the number of contracts that have been bought or sold but have not yet been closed out. High open interest suggests strong market participation and indicates that a stock is actively traded.

Using Open Interest for Stock Selection

Here are the steps to select stocks for intraday trading based on open … Read the rest

Lets get into depth of Volatility and Implied Volatility

Let get into depth of Volatility and Implied Volatility

Volatility measures the rate of price changes in an underlying asset, affecting options prices. Higher volatility leads to higher option premiums, as options based on volatile assets are more likely to be invested before expiration.

Low-volatile assets have tight price variation, indicating uncertainty in future asset prices. Options are only invested if underlying price is near strike price.

If an option is in the money, its premium may also include intrinsic value in addition to time value.
Just the time value of the option premium is impacted by volatility.
The length of time to expiry will determine how much volatility will effect option pricing; the shorter the time, the less impact … Read the rest

Selection of stocks for results season

Selection of stocks for Results season

 

We can choose stocks for the upcoming three months of trading based on results ( quaterly) since the results season is about to begin once more.

-If a business reports 50% revenue growth and 15% profit growth in a quarter, then the market will lose interest.

But think if a company reports a 15% increase in sales and a 50% increase in profit, the market becomes interested.

Because the market usually seeks rising business with profits, you should follow it.… Read the rest

How to control emotions and trade in market

How to control emotions and trade in market?

In Simple words how does market work?

“Market is all about Supply and Demand, it is what drives the market that is prices up and down”

Now why do people fail in trading the stock market?

People have emotions like fear and greed which is what makes humans make mistakes in live market.

  1. FOMO- Fear of missing out. It is a feeling that he may not a position in current trend where a trader makes mistake like entering too late making his stop loss very huge compared to reward where the stop losses are taken.
  2. Greed- A trader can be awaiting for big profits while not booking the current profits at hand
… Read the rest

How stock market works and how money / price is supreme

Impatient trader vs Patient trader

How does the market take money from a impatient trader and rewards a patient trader with proper risk management in FNO segment?

In FNO, it’s all about probabilities where a edge lies with sellers of options having a 66% pop vs buyers with 33% pop approx. But not everyone has capital required for option selling. So only left option for low capital people in FNO is only buying options.

People showing big MTM profits on YouTube etc..

Here many people showing big MTM profits on YouTube and misleading techniques inspires them into market. For them where every try of a technique takes off your capital from you to someone with large capital resources who can … Read the rest

Do tools using Open Interest like LTP Calculator, OI Pulse, Autotrender work?

How do Open interest give a glimpse what market is going to do and is it 100%? Do tools like LTP Calculator by Investing daddy, OI Pulse by Sivakumar Jayachandran and Autotrender by SMC work or not?

Now, basics of Open interest on options can be found on many websites including Quick Hack- Stock Trading hacks – Technical Analysis and Studies for trading hacks

Let’s dive into this vast topic today of open interest. Do you know that Indian indexes like Nifty and Banknifty are one of the highest traded indices in terms of turnover? As usual in short words “When Huge sum of money is involved then obviously then there is scope of manipulation and opportunities. No there … Read the rest

Two Parts of trading in stock Market

Two parts of a stock trader must be in.

1. Intraday trading

2. Consistent income from swing trading

For intraday I use trend lines – support, resistance connecting HH’s (higher highs), HL’s(higher lows) and also demand/supply zones. Option chain data can be used for supplementing the decision.

Few rules I follow consistent income where I use 70% of my capital using cash market stock delivery in below swing trading and only 30% in intraday where there is more risk:

Same as intraday use the trendlines here as well including supply and demand zones. Market should have a scope of moving up which can be found out by using option chain resistance and support which should have a scope/room of going … Read the rest