Options trading has long been a popular form of trading in the Indian market. It offers traders the flexibility to hedge against market volatility and enjoy the potential for high returns. With so many option contracts available, it can be confusing to choose one. However, what if there was a tool that lets you look at all available option contracts to help you select the best one and maximize your gains?
Option Chain enables traders to do just that. In this article, we will explore what an option chain is and how to do option trading with it.
What is an Option Chain?
An option chain is a list of all available options contracts for a particular underlying asset such as stocks, commodities, indexes, etc. In other words, an option chain displays various contracts along with its information such as strike price, expiration date, puts, calls and the trading volume for each option available for a particular underlying asset.
An option chain can be a handy tool in finding suitable contracts and strategies in option trading, as it provides access to real-time updated information about option contracts.
So, the question is how you can use options chains to trade. Well, it is simple, you can place trades directly from the options chains based on your preferences. Let’s find out how.
How to Trade from Option Chain?
Reputed online trading platforms allow direct trading from option chains. Dhan enables direct trading from option chains without having to switch windows between chain and trading interface. Here is how to do it.
1. Choose a Stock/Index
Choosing a stock or index is the first step in trading from an option chain. You can find large companies or you can go for smaller companies as per your capital and preferences. You can view the list on an option screener, which is constantly updated with real-time data.
2. Access Option Chain
Once you have selected the stock or index, just tap on its name and you will be able to access the option chain. It usually displays a list of all available option contracts along with their price, volume and other relevant information. You can select reliance option chain, bhel option chain, tata steel option chain or any other as per your preference.
3. Pick a Contract and Trading Strategy
From the option chain of your chosen asset, you can pick an option contract that matches your capital, risk-taking ability, and trading goals. Then, choose a strategy that best aligns with your aim and risk tolerance.
You can also see how your trade would turn out by using readymade options strategies. Dhan enables you to use these strategies and see the projected P&L of an option contract and strategy to help you choose the best trade smartly.
4. Place and Monitor Trade
Once you have picked a contract, place your order through the chain. Be sure to specify the strike price, expiration date, and the number of options contracts. After placing an order, monitor the performance of your trade and make necessary modifications as needed.
An option chain is a powerful tool for traders that can significantly enhance option trading. By following the steps explained above, you can effectively trade from an option chain and maximize your returns. Many trading platforms like Dhan provide the ability to trade directly from an option chain.