How to Pick Trades from Option Chain | Open Interest Analysis| OHLC Price Action
Hey I am Apurva Sheth and welcome you to The Right Choices of Dalal Street's 85th Episode In the last episode we were talking with Jyoti Budhia ji and In this episode we looked at how we can combine simple data points such as open high, low, close with open interest. By doing this you can find many interesting trading opportunities, so in today's episode we will discuss our Will continue the conversation further and how we can get even more high conviction opportunities using the option chain Let's start today's episode It is said in the market that where there is highest call open interest there are the maximum number of positions open which will work as resistance and where there is highest Put open interest there is maximum positions of put open which will work as support Long build up plus open and low nearby Plus Highest Put Open Interest Nearby How will all three combinations be? This can be exclusive This is a very strong bullish indicator Now we will see Muthoot Finance option chain If you look you will see an open interest around 1100 and one around 1000 Now 2nd highest Open Interest is seen near 1200 How much is the difference? 100rs how much is the % It is around 9 From option chain i took 8 to 10% so who informed me? Option writer In option chain, if 8 to 10 percent difference is not found between Highest Put Open Interest (HPOI) and Highest Call Open Interest (HCOI) till then I avoid trading, so this is one more filter The Highest Put Open Interest here is at 1000 I will explain all I am explaining both how to tackle the situation now you have seen that Muthoot Finance had already given you the signal a day before. over here which was Around 1050 what would you do in such a situation? you are already here Why I took this position today at 1200? because here if you see where there was the highest open interest, all calls are getting unwind means from there the open interest is getting depleted slowly. and it is getting builtup here. It means it is creating new resistance Are you getting? And this is trying to be new support the distance is approximately 8 to 10 % Now let's see 2nd. Apollo Tyre Your highest open interest is around 290 and it is near 280 near the put and on call side it is near 300 4% is taken, Highest Call Open Interest at Rs.300
should i carry the position? You can take partial profit and exit Now you will ask at which strike price to buy? when you started you knew price can come around 300 At which price it was started? At 290 So if 290 was the starting price, it means that the ATM was at that time, whatever its price would have been. If you see today it is increased by ₹ 5.70 so just if when I had bought it was below ₹ 5 So now this ATM, has become a new ATM So now this price will become its price we work like this, step by step by analyzing the option chain how to apply stop loss in option? how much is the difference from here to here? ₹ 10 how much would it have cost 300 call I am showing HIGH & LOW so low is 6.30 Open is in 6.75 You must have got it at ₹ 7 or ₹ 7.50? right yes or no
What was its price at that time? its low was ₹10 you got an idea that ₹ 11 can be premium now you got that the target can be of ₹11 So now how much is the difference? ₹ 10 Now i will check the opening price And its opening price is 325 you can apply SL like this The option chain tells us what should be the target and premium We dint get a chance at Divi's Lab. It was opened at low Tell me where is support? At ₹ 80, 683 is maximum put open interest This is support from with this where do i need the resistance At above side... how much? We will take 90 at round First, it was at 85, but there it was unwinding and addition at 90 you got the highest call open interest with resistance Here, 80 is support and 90 is resistance From where did you get 8 to 10%? It is from option chain now you will say, Sometime it happens that at 1 strike price we get maximum Y last month Hindalco was at 400 so when i saw in hindalco 400 but in whole month Market of Hindalco was up and down 10-15 points, it was just moving in the middle of that. there was no directional trade in that now we have directional trade If seen in GAIL, is only on 90.
To trade in this, I will keep it in the last preference, The reason is Highest open interest you are getting here is at 95 Don't force yourself a trade no need to force which is easily visible that will be my 1st priority And out of that they do SIP and make investments, so like Out of this, we do similar stock SIP and investment we also invest a little bit. Now coming to the second point, who should invest how much how many lots to buy? In futures if you get a chance to hedge it is good opportunity otherwise it can create problem well if i buy futures, and hedge with atm put in front of it According to this, it will be better of I take a call, it will take 33% margin, which is to be the original margin. Yes, if I buy futures and put, but here I do not have anything like that.
Neither as much as the premium is, you have to pay, Maybe or depending on the stop loss you are holding, your position size will be decided. How much money can we bet? only that much that can we lose or you are OK you lose 50 thousand, 1Lakh, 2lakh Retail Perspective 10-20 thousand Many people who come to me, want consistent income They want to become a professional trader If yes then does professional trade want quick money Professional's has patience If retailers want to become professional traders, they have to be patient (to keep patience) So the first thing, I do not invest or take a lot of more than 5000 The second thing I'm the buyer, I know every moment the meter is on so what does that mean Call it premium decay or money was taken on a loan If I took the loan money and put it in the back then what would you say to me now? Money will not grow by keeping in the cupboard but interest is charged when buying an option, and you know validity is of 1 month one day it will be zero square off as soon as possible we understand this in real life, why don't we understand while buying option what did i say one week If the price does not come within a week, then return it to the market when required, we will buy again. So means I have got two varieties of stop loss one is time stop loss and one is price stop loss Option buyer knows that every moment premium will depreciate what are we hoping? that some day a prince will come on a white horse to take us I will like to tell you one more thing. Many people tell me that Invested lakhs in option, you did not invest lakh rupees because you have bought premium So it is very important for us to have knowledge of what we are trading, I call it KYC(know your trade) When we buy / sell in cash it it actual asset buy/sell When we are trading in the futures, we are trading in a promise If you must have heard Hindi channel many times When you trade in options, there is no present, there is nothing, when date is over, it is zero.
Option means you are trading premium, understand it as money taken on loan, as soon as possible use it immediately and return it to the market, otherwise you also know that the loan money will climb and it will haunt you for the rest of your life I want to say that basically how do I do option with data reading have covered it and also told you that when we see all long built up, what it is long build up open low almost same and also check if we are near highest put open interest If you'll remember I just told you Highest call is getting unwinding and puts are getting added which i have shown in Muthoot If market is falling than Put is unwinding and calls getting added means support must become weak and resistance must be strong And before that we have a small section where we ask some rapid fire questions So I'll ask you as well and then we'll wind up so my first question is The whole world knows how to trade, the whole world know to earn money, it is not that no one knows how to take it. Where is your mind set if your mind set is not right, it is just a trade, if your mind is very strong In the episodes we looked at how we can combine simple data points like open interest with We can find interesting trading opportunities, we saw in today's episode Please subscribe our channel for more episodes thank you