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What is ATM (AT The Money) Options?

ATM are those options having Strike near to Spot Price. Current Price and Underlying is near. Example : NIfty is trading at 16970 Put Option : 17100                    ITM 17000                    ATM 16900                    OTM ATM Option has Delta Value 0.50 why ??? Because Probability of Nifty going up or down from Current Price is 1/2 i.e. 50% Call Option : 17100                     OTM 17000                     ATM 16900                     ITM  For Option video : Exercise : Reliance : CMP 2200 Rs PUT Option : 1800 2100 2200 2500 Call Option : 2000 2100 2200 2400 You can Comment here for more updates and Query on any option related Topics.

Lesson:3 Profit From Abnormally High Options Trading Volume

Many time we are looking at trades where few strike having huge volume, but how to make profit out of such high volume options? moreover, why such huge volume seen in few strike prices?

Under the right conditions high options volume can tip you off to some potentially explosive moves in individual stocks. Of course these don’t always happen, but when you see high volume you need to know what to do next…
Under the high options volume seen in individual stocks, i.e. does not always happen each month but when we see such volume everyone has to know....

There are usually only 3 main reasons for high option volume:

         Upcoming News/ pending announcement.

Do you see and kind of hint, rumors about companies might affect much on earning part in near time frame. it can be new product launch, merger, acquisition or any approval specially in pharma sector. It provide big place to bet for speculator and expecting big announcement from management. Example: Special Package to weak bank, Product Launch by Auropharma. Last week Result of RBL BANK came, result was good but commentary of CEO explain next 3-4 Qtr result may not come up to mark, which create big panic and stock moved sharply down from 580 to 400 in few days. Moreover, Coffee Cafe Day company made few transaction in this company so Inspection of entire transaction may create big panic.

Hedging Purposes.
If you have a stock in the portfolio and seen hard selling due to few short term announcement or panic result. May put buyer come to buy put option to make portfolio safe. Many times in Index i.e. Nifty trading at 11000 seen Option volume beyond 20% Strike price like 9000 or 9500 Put option with huge lot for hedging purpose. Such option buyer does not really expect such big fall but to have Insurance in case any adverse moves comes. Specially HNI or Institutions do such trade.

Beginners Got Loose In The Market.  To tell you honestly, many innocent trader come to learn option trader and in initial days usually they buy OTM Option which are very cheap in money term but no real logic of buying such option where no real study or analysis done by trader. Many times on Expiry days big false message forwarded to trader to buy stock option name SUZLON trading near 4 and call of Buying 6 CE at 5 paisa @ 80000 lot size, simple investment of 4000 and target of 60 paisa gives 48k. Retail trader hurry to buy such option and end up with big loss.

Now that you know what can cause the high volume, you need to know what it looks like on the pricing screen. High option volume is when there is stand out volume that is head and shoulders above the volume for similar strike options. Typically it can be 200% or higher volume.
Being an option trader once such situation is been identified, one can do position where risk might be minimum even can earn massive return in few days. Many times during massive movement in stock like Jet Airway few days ago moved more than 100% and stock moved from 26 to 80 Rs. on that day call of 120 Strike trading near 5 Rs, which is much risk free premium to sale.


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