Zerodha, one of India’s best discount brokers, provides a trading platform that allows you to trade in multiple segments, including options. But how to trade-in options and what is the Zerodha option chain?
Many beginner traders often are unaware of how to use the option chain data to select the strike price and why Zerodha provides an option to trade in the limited option contracts in the market?
In this article, we will be discussing a complete detail on the Zerodha option chain and related information.
What is Zerodha Option Chain?
Zerodha provides you the Sensibull option chain, which lists all available call and put option contracts along with their bid and ask price and other details.
Here are some of the components of Zerodha option chain:
LTP (Last Traded Price): This is the option premium in Zerodha, i.e. the value paid by a buyer to acquire a position at a certain strike price. A positive change (LTP %Change) in the premium value represents the growing demand for the options while the declining value exits traders from the position.
Open Interest in Options: The next important parameter displayed in the Zerodha option chain is open interest, which gives you the detail of the current open positions in particular options. This value increases whenever a new buyer and seller takes a position in the market and decreases when the existing buyer and seller exit.
Implied Volatility: This gives an idea of the future move of the stock price in any direction that helps a trader in determining the risk or reward on the basis of the current analysis.
Options Greeks: These are a set of calculations that helps in determining the right change in the value of the strike price with respect to trend, time, and volatility.
To access the option chain in Zerodha the first and foremost step is to Zerodha demat account opening and activate the F&O segment. Once done you can easily access the option chain in the Kite app and web platform.
How to See Option Chain in Zerodha?
So, we know what data we can get viewed in an option chain, but how to check this data, where in the app we can find the option chain?
If you are a new user using Zerodha Kite or trading options for the first time, it is sometimes difficult to find the option chain in the Kite app.
Let’s explain this to you step by step:
Login to Zerodha Kite using your User ID, and Password and enter the OTP received on your registered mobile number.
If you want to view the option chain for NIFTY or BANK NIFTY, type in the search box in the watchlist. Other than this you can search for options contracts of some of the stocks.
Scroll to the bottom of the page, and click on Option Chain.
Zerodha Option chain opens with the detail of a few parameters like OI, LTP, etc.
If you want to see a complete option chain, then click on View Full Chain.
Here the Sensibull option chain opens with all strike prices and completed details of the call and put strike prices.
Zerodha Option Chain Analysis
The option chain provides you the data on the call and put option, premium, and open interest that helps you in choosing the right strike price. Now to analyze the Zerodha option chain, first, choose the type of option in which you want to trade.
For example, if the market is bullish and you want to buy an option then call option data is important to analyze in order to choose the right strike price.
The ITM options are differentiated with a yellow background while OTM options have a white background.
Now seeing so many strike prices is something that confuses the trader. So what is the right way:
First, check your risk appetite and holding period.
For example, if you are having a low-risk appetite and want to make money with the option settlement then choosing the ITM option can help.
On the other hand, for intraday trading, buyers generally prefer OTM options. But for this, it is good to choose the near OTM by analyzing the value of the delta that gives you the rate of change of premium value.
Secondly, check the demand of strike price for option trading. Of course, it makes sense to pick the strike price where you can find maximum new positions. For this check for the open interest data.
High Open Interest with the increase in premium depicts that new buyers are making an entry into the market. On the other hand, an increase in OI with a decrease in premium signals the aggressiveness of sellers in the market.
Check for the expiry, if you choose monthly expiry, then the premium would be high because of the high time value. This often increases your loss as premium value depreciates with each passing day.
You can rely on the Options Greek, theta to check the rate of decrease in time value.
Next comes implied volatility which makes it easier for traders to determine the risk-reward ratio. This generally depends on the Volatility Index value which works in the opposite direction of the market index (Nifty 50).
Again, how much change in premium value with a 1% change in implied volatility. Generally, the higher the IV, more will be the premium value. So, this is something that works in favor of the option buyer.
The best part of the Zerodha Option chain is all this data is available in one place which makes it easier even for the beginner to analyze options.
On the basis of the current market data and using the above parameters you can easily pick the strike price that can offer you valuable returns and profit.
Zerodha Option Chain Charges
Another important factor is what are Zerodha option chargesto view and access chain features? Does Zerodha charges additional fees for the option chain. Here, Zerodha does not have its own option chain, it means using the login Id you can access the Sensibull option chain.
If you are using the above features to analyze options in Zerodha Kite, then you need not pay any other charges to the broker. But there are some advanced strategies available on the Sensibull platform, if you want to get access to those strategies then you have to buy a Pro Subsciption.