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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.

Checklist before Buying Option, Adjust Position EOD 12th March 2021

 Highest OI & Nearest Strike as on 12th March 2021

How to Read Above Data, Let take Example of TCS Stock CMP is 3072.55 and Showing 3rd in our sheet. OI, Open Interest is showing 2895 Lot and Future Open Interest is near 23411 Lot. Lets check the Data First,

Where as, Future OI is 

Open Interest is 70,23,300/300 = 23,411 Lot

Now, We have ready data on hand having highest Open interest from Option chain. This option data shows where seller pain will start, like 3100 CE option having Open interest more than 10%, while Current rate is just 0.89% Far from this Pain strike for seller. Till it cross 3100 it will act resistance level for TCS stock, As seller has received some Premium when Option has short, till Strike + Premium is Break Even Point for seller, Say if TCS CE 3100 premium is at 50 Rs, Still stock will be in hand of seller till stock price is near 3150 Rs. 

Once it cross 3150 Level, Panic will start from seller side, either they have to carry loss or start hedging or adjust the position. How to adjust position on option trading? Seller side Option,

Option 1 : Either option seller can book some Pre decided Loss like 3150 is Break even Point and additional 30-35 Rs is Stop Loss, so at 3180-3185 option seller will close Position. 

Result 1 : Option seller will demand CE 3100 Strike to close position

Option 2 : Either seller has to book 3100 CE and sell 3200 CE, 

Result 2 :Again Buy demand in 3100 CE and supply in 3200 CE

Option 3 : Suppose Once it cross 3150 Level stock moved 3-4% more, now option becomes IN THE MONEY and having some ruff Price Quotation, TO cut loss seller has to Buy FUTURE LOT to match Delta of ITM option 1 and close Position, now seller has no loss upside but need to adjust again below 3150 Level as FUTURE will BUY, While below 3100 CE option becomes OTM but Future will loss amount.

Result 3 : Demand in FUTURE

Option 4 : Either seller can sell PE option strike 3100 Level and cover some Premium to set off loss from 3100 CE option.

Result 4 : Supply in PE option

From above 4 Result one can do bull or bear spread, Like buying one Option strike and Selling one OTM strike which is having MAX LOSS of Strike GAP, Like selling 3100 CE at 50 Rs and Buying 3200 CE at 20 Rs, which indicate MAX LOSS will be 70 Rs ( 100-30( Premium Received), MAX GAIN will be 30 Rs, so Risk Reward here is almost 2:1, But probably of getting success is more but seller will never create such position as risk is 2 Rs while Reward is only 1 Rs.

TO sum up above all result, one thing is clear once stock cross 3150 level, CE side demand is sure or FUTURE demand is possible, so mostly such situation will create panic for short period, being option buyer we can make position for 2-3 hours view and take benefit here.

Option buying is like CANCER, it spread 24 Hours like wise if movement doesn't come or came later than anticipated period, Premium will wipe out. so, Option buyer has to check panic point of seller and enter for short period trade.

How to buy option or equity or Future ?

Here, one can enter in TCS stock after crossing Strike level here it is 3100 CE, then wait for some more movement check Open Interest data is there any reduction in Open Interest like previous data total OI was 2895 Lot and now it is near 2800 so, almost 95 lot has unwinding, it is called reduction in Open Interest, It can be Intraday or Position Open interest data.

Intraday Open Interest data is like taking data at every 30 minute interval say at 9.30 AM TCS has 3000 Lot Open interest, it mean new addition of   105 Lot, by 10 AM it is near 2925 so here one can say 75 Lot Open Interest reduced from previous time frame is Intraday OI unwinding.

Positional Open Interest unwinding is like any lot seen below previous day here, 2895 like Previous day data, if any reduction in OI below 2895 is Positional Reduction in OI. 

So, One can Enter in Option buying One Positional OI start, in TCS case our entry should be near 3110-15 Level with SL of 3075-80 Level, Here STOP LOSS will be near 1% of Stock Price, Target will be 2-5%, TIME FRAME will be 2-3 hours, It will work powerful once you start tracking few stock option chain. 

Beauty of this method is the level 3100 earlier act as resistance becomes support for stock and such situation always help buyer to win the race. Here, entire race is between buyer and seller, till today seller was riding the car, today after crossing Panic point of seller, race rider might change to Option Buyer and create panic among Seller once stock moves up and seller will panic to cover or stop loss. so, such situation being a buyer of Option or buying some equity will help us to gain speedy return in span of 2-3 hours. Don't carry Option more than 2-3 days if you plan to hold, either sell OTM option or buy PE option to safe capital if you want to ride option as buyer. 

Each and Every stock has Operator, Operator always create position over a period of time, such position is show in Option chain only, Many times Option chain miss guide as some times stock trading at support level so people BUY FUTURE and SELL CE OPTION, or SELL FUTURE and SELL PUT OPTION, so alone Option chain study will not help to reach some conclusion.  

It is 95% true that Option seller always win the race, OVER a Period of 12 Months, Option seller gain money from Market, almost 30,000 CR option expire OTM, it mean entire amount goes to option seller pocket, but if one want to buy option and survive in this Market where VIX is trading above 20-21 LEVEL, some powerful technique is needed. HERE, One can check the MOVEMENT once stock trading above Strike PRICE and start OI to reduce once can enter for long trade. 

IT apply to PE option for downside.

Many times seen option Strike use to change over a period of time, so such case buyer always loss premium, Like today TCS has Highest Exposure at 3100 CE strike, after 1 week it shift to 3200 CE, so seller has huge range to safe guard position.

TO sum up today's, Learning one has to study following point for reaching to conclusion.....

  • Option chain Data
  • FUTURE Open Interest data
  • Price movement of stock
  • Cash Delivery of Last 15 Days
  • Range File data
  • Top client data
  • Option VWAP since it Trade
  • Sector Analysis
  • Rollover data
  • Chart Formation

I am confident if anyone is checking above check list before entering any trade, it will perform for sure, Always try to spend more study for end of day analysis, as biggies always make position in longer duration so identifying such situation is only way to spend time with data and create your own model of trade. 

Stock Market is RIVER, if you know how to swim in water you can ride any instrument available in Market, “The stock market is a device to transfer money from the impatient to the patient.”


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