what are the things that are important in price action? In price action, it is important that we can identify support and resistance levels in the market on the basis of price. Now we will understand on the basis of option chain. The second thing that is important is that you can identify breakouts and breakdowns and you can identify false breakouts and false breakdowns and get trapped in it. What is important besides thesis that you can understand candlestick patterns and you can understand chart patterns and take the right trade.
The best features of Asti trade, I personally felt that their mobile app is very easy to use for trading. If you go to the tools, on their mobile app, you will get a strategy builder called Lighthouse for free of cost. You give 5-6 thousand rupees to the strategy builder separately in the market, which you are getting free of cost for free of cost. You can see your max loss, max profit here and especially if your trade-in options, then making you a strategy and trading is very convenient and fruitful. If you buy out of the money options here, it is very important for hedging.
In many brokers, we are not able to trade in out of the money options. You will be able to do it on Asti trade. Along with this, more than 1.5 lakh active traders are already trading on their platform and it is a reliable platform. That’s why we are going to use it today. Now why did we take Asti trade here? Because here we will understand the option chain in different way.
Till now you were simply looking at the option chain of NSE, but here you will simply be on the chart and you have to right click. As soon as you right click, you see the first option of the option chain. Now you can see that we’ve opened the chart ones. If I want the option chain of Bank Nifty, as soon as I click, an option chain comes here and why this option chain is different because here you can see lot.
First of all, you can see here that Vega, Theta, Gamma, Delta, these options are provided by Greeks and this normal option chain that you see, this is OI, change in OI, volume, LTP, end strike prices, IV, you can see all this. So you can see the call side on this side and put side on this side. So this is an option chain, a detailed option chain because you can see option Greeks here. So what did we say first that we will understand how you can identify in the market that where is the support and where is the resistance. So first we will take just 2 minutes and we will teach them to see the option chain once again.
See, where was the Bank Nifty close? 43198, about 43200, so at 43200, Bank Nifty has closed. Now here you will see 43200, so we have a strike of Add the Money, just 2points below that, so you can see a line in the middle, 42200and 43300. Now when we trade in options, we have 3 types of options, Add the Money, In the Money, Out of the Money. So what is Add the Money, 43200 is our Add the Money. Now when you see the call side here, all the options in the call side, where the price has not reached, like when do we buy call side, when do we buy call options, we buy call options when our expectations that the price will increase.
I will definitely take some time; I will explain in detail today. So you buy the call option, like we call it CEB, when do you buy when you think the price will increase, but in the market, are there always only buyers, if someone is buying an option, then someone must have sold it’s here when you understand that a position is created, first definitely the seller will come, someone will buy it, because it is running at such a speed in the exchange, then buying and selling is happening in the market, it is happening on the exchange. Now what is created by this, volume is created by this.
So now here you have seen the strike price first, on Add the Money, you can see that if I talk about the option of 43200, so here what you can see, you can see the Loaf 202 rupees, I will come here a little so that when the screen recording will be applied, it will be easy for you. So here the price of 202 is visible, here the amazing thing is that if you want to buy it, so straight away you can buy and sell trade by looking at the option chain here.
If you specifically want to see the chart of this strike of 43200,that too of the call side, then you simply click on the chart here, its chart will open, so it is very much convenient, I will click on it and show you, if I remove it, then you will see the bank nifty on one side, and on the other side, the chart of the call option of 43200 has also opened here, if you want to remove it, then you will click on it in the multi-layout, in the same way you have understood that you can see 3-4 charts on the same screen.
Alright, we come back to the option chain, so that we show what we were discussing once, so what to see next, you have to see change in OI, this change in Oasis very important, if you look at this side, then plus 62%, plus26%, plus 66%, plus 39%,means here the OI is increasing, in these strike prices, there has decreased, but weave to see in which OI, that more change is coming here, means here the add-on is happening, if the add-on is happening, then what does it mean, we are just going to understand it, before that you see OI, OI means open interest,
what is the difference here, in this option chain, you will see straightaway numbers, how will you see the numbers, if you see here, then you are seeing here 21,90,000, 33,00,000, 39,00,000, 64,00,000,so if you are looking on this side, on the call side, then what becomes important for you, that you see where the most open interest is standing, so if I see where the most open interest is standing,64,94,000 quantity is there, at a strike price of 43,500, I am telling you one thing, now will not see anything, so if someone suddenly asks me that where will the market take resistance, then I will tell you in a minute,
first of all, if the market starts to rise, then for that there will be a very important level, 43,500, where the market will not be able to break suddenly, if the price goes up, then it will definitely get stuck there, it is possible that the price will fall down from there, there is a very high probability of this, but it cannot go up suddenly, it will have to stop, so how did I find out this important area, I have simply seen OI, I have seen open interest, now if you have seen open interest here, then you will see open interest on the other side, when you see open interest on the call side, especially in out of the money,
then you get resistance of the market, now we have not plotted resistance on the basis of price action, but we have seen straight away open interest in the option chain and identified where the maximum is, the important thing that you have to understand now on number 2, so this is the second important thing that I is maximum here, but has the change in OI been positive in this strike price, you will say yes, 66.61% here open interest is showing positive, means OI is high, if Oasis high in this strike price, what does it mean, it means that there are many such people, see who has more money, retailers have it or institutions have it, HNI has it, you have it,
if we talk about FIS, DIS, which are domestic institutional investors, foreign institutional investors, people of HNI category, who trade in the market with very good amounts and retailers, you can say 50,000, 100,000, 1 crore, 2 crore,5 crore, this is normal amount for the market, you say 5 crores is big, this is normal amount for the market, if someone is trading with this, then think that this position takes a lot of money, if you go and sell only 1 lot, you do one thing, you log in to your Demit account, you can check here also, on Assay trade, if you simply go to 1 lot and sell the Bank Nifty’s strike price of 43,500, then you will require a margin of about 1 lakh, now here you see the quantity of 64,94,000,
how much money is required to sell such a large quantity, a lot is required, so think here that the thing that has been sold, is not an ordinary person, if someone has invested money, then he has done analysis after thinking, now if money is invested here, then what will be the benefit of the buyer, if someone, you understand, those people who trade in out of the money, they see that the strike of 43,500,its call option is of 83rupees and the add the money is of 202, so I will not take add the money, I will take the one of 83 because of the money, as soon as you go to take the call option of 83, then someone has sold it,
then only you will be able to take it, if someone has sold it and you are going to take it, then when will your benefit be on expiry, on the same day you know that the price of the option can increase a little if you are taking in out of the money, but if you ask for it clearly. Your money will be zero and option trading is zero-sum game. If money comes out of someone’s pocket, it goes to someone’s pocket. So if it becomes zero here, then the seller market did not reach here, in fact, it did not go above,
then will earn money. So the seller wants to make this 83 rupees zero by investing a lot of money. It is taking you 1 lakh rupees and here you do 83 into 25. Your seller wants to earn only this money on one lot. I will show you what he wants to earn on one lot. In today’s date, the day we are doing this analysis,
if you are seeing the LTP of 83 into 25, he is earning only 2,075 rupees by investing 1 lakh rupees, but it is almost 2% of it. He is taking so much risk to earn this much. But what do you want? Should I invest 10,000 and it becomes 20,000 for 10,000? You want to earn 100%, but will you be able to earn forever? That’s a big question. So you understand that support will become stronger if the OI increases here.
If the OI starts to decrease here, if the change in open interest starts to decrease here, then we could have said that the resistance is getting weak and if the resistance is getting weak, then the price can run up, but the chances of the price going up here are very low and we will analyze it in detail that what happened that the market was able to go up to this level. Ok next. So now we look at the put side. If you look at the putside at once, if you look here, then you see the largest quantity of 43.6 lakhs.
Now what is this strike price of 43,000. If there is any round of value or if it is in the multiple of 500, then itis a very important zone. What is the reason for this? See, the strike prices in between, you are understanding that you are trading in it today. Now we can change the expiry here. Here in the platform of Astra Trade, you will simply select expiry here.
It will show you different expiries. If people trade in the monthly expiry, you are trading today. Now people, most of the retailers, they trade in the current expiry. But the one who has sold the deal, he has not sold it today. You see here, see carefully.
The strike price of 43,500 is showing that the change of LTP has become minus 44%. What does this minus 44% mean? Its price has become low. If it has become low, then if someone had bought it, then its loss has been reduced. But if someone had sold it, then its benefit has been here. You know that because of theta, the premium is melting regularly.
So it is possible that in this expiry, which is the expiry of 11thMay, the seller has not taken the trade today. He took this expiry trade a week ago, 15 days ago, a month ago, 6 months ago and he did not sell it. And this premium is constantly melting and it will become zero on this expiry. So if we change the expiry, then the premium becomes expensive. I would like to explain this to new people. Let me clear the support once.
So if we look at the support here, then the change in Onion support. What is my first question? That here the change in OI is in positive or negative. If it is negative, it means that the support has become weak and if it has become weak, then the market can fall further. Understand this. Here you can see that the probability of falling below0 is less. OI is very strong here. Plus, here the change in Oasis also positive. If you understand this much, then you have suddenly removed a range of the market. So looking at the option chain, what support and resistance have you removed?
You have removed resistance of 43,500. The market will have a lot of trouble in breaking it and the level of 43,000 will be very high. Now, the day we are trading, we will definitely see that the change ion is very important. If you see in the day after tomorrow and you see that the change in OI has become negative, then the support may become weak. The price can shift further down from here, but then you will also see that the number of absolute OI will also decrease. Now, where is the next support after this? If we want to see the next support, then after 43, we see 23 lakhs here and this is 42,500.
See in the round figure, at the level of the round figure, if it breaks, then the support for the next market is directly500 points below. The market will have a problem in breaking it, but at that place, you will also see that if you are going down at that time, then what is the change in OI going on here? Alright, so for now, we have identified resistance and support while looking at it at the level of the round figure. For now, 43,500 and 43,000. Now, if you simply plot it on the chart, now you have identified support and resistance while looking at the option chain. Let’s also look at the price action.
You saw that the price went up from here, but here the price got resistance. So I simply took a horizontal line here, although I have already explained to you that the support and resistance are always a zone, but still we plot a line. So here you can see that the price was going up and then it could not go up in this area and from here it took a small reversal. Now without thinking, you were simply looking at the price action. See what is the level here, 43,521, almost43,520 or above 500, means above 500 to 20 points, above 21 points, the price went here and then it fell. What did we see on the option chain now?
Whereas the resistance? 43,500. So if you were trading and many people were seeing that the prices running up, but at which point will it get resistance? You would have already identified it by looking at the option chain and there you would have understood that if the price has to go up, then it is going to spend a lot of time here and on the basis of this, you would have been able to take more accurate trades. Which trading strategy do you have to follow? I am going to give youths in the next two minutes, so listen carefully. Now we identify the second thing, you have to find support in the market.
So if we have to find support, then for now we understand that you are not seeing anything here. Here you see this, what do you see here? We see from the beginning that the price was coming down and it came here and tested once, then the price went up, although it broke the support it took from here. But for now, if I want to identify a support, what will happen is that I will see here that many times the price has taken support, then once again it took support, the prices rotating around this area.
So if I take a rectangle here and make a rectangle like this, then for now it is an important support area for me. The price has come around the support, but despite coming around this support, which will be an important support area for me now? You have taken it out of the option chain. This will happen on the basis of price action. What do you see on the basis of price action that the price came, it was going here, then it went down, then it rose up, then it went down, then it rose up, so here it has spent lot of time, so we will say on the basis of price action that this is a support area and the price that has fallen is around this support area?
Snow the support and resistance that we are identifying are done on a 15-minute time frame, but if you want to plot support and resistance on the basis of price action, then you should also learn multiple time frame analysis. Because you have understood the option chain, then you will simply go here and draw a line at 43000 and you will know that this is the range for you for now. Until this range is not broken, down or up, there will be no break out, no breakdown, no big move will come.
And you can take a trading strategy on the basis of this. If you say that the market will remain in this range, that is, it will expire between 500 points, then you can make a strategy and trade. When the price breaks down or breaks out below, then you can trade accordingly, but then you have to look at the option chain and understand what is going on in the option chain. Now I will show you something more important. Now suppose you have identified support and resistance and you are such a trader that you say that I want to do a range-based trading.
Now there can be two things here. The first thing is that the price comes down, you buy it, then the price goes up. When it goes up, you sell it. So this is one thing. The second thing is that you know that in the options, you get the advantage of theta. So why don’t we make a strategy. Now I will show you another amazing tool on the Sara Trade platform.
You will simply go to tools and here you will click on the strategy builder. Many people are giving thousands of rupees in the strategy market. Your money will be saved here. You can go for free and open your Demit accountant you will get this strategy builder free of cost. Now suppose you want to trade in Bank Nifty.
Now here you want to find a strategy for this expiry. By this 11th, you say that you have identified that the market will not go above 43,500and will not go below 43,000. You have taken out the range. Suppose by analyzing the option chain. So if the markets in the middle of it, Bank Nifty is in the middle of it, then what strategies can you take in which you can make good money. You simply click on continue and it will give you a strategy straight away. It is saying that either you make short straddle or make a short strangle. It is telling you separately here. Here you can have a max profit of 18,250 rupees.
Here you have to select which strikes you want to do, then you will sell both sides of 43200 in straddle, put and call, and when you sell, then your max profit for this expiry is 18250 rupees in 2 days. If you say I don’t want to make this, I want to make a strangle, then strangle also shows you that there can be a profit of 15000 rupees,
what margin will be applied, you can see this here, you can continue if you want, if you want more analysis, you can click on analyze, it will also show you the payoff chart, how many days are left until the expiry, it will show you everything, in fact, you can also see Greeks here, so people pay for this strategy builder, you are getting built-inhere, and you can also place a trade directly from here.
finally, the option chain can be used in multiple ways, alright, finally am going to give you a very beautiful concept, understand this, you have to identify one more thing, when you are looking at the option chain, you also have to see which side is getting more writing, which side is getting more writing or put side is getting more writing, if you identify which side is getting more writing, then you will also find out which side of the market is more biased, now if you start to find out the bias of the market, then there is one more concept, I will tell you very quickly, this is more important,
now what you see, there is a breakout, we took a resistance level of 43500,now here you see a spike came and the price tried to break out, now one important thing I told you, at that time you will see OI and change in OI, you will see its percentage, if this is also in positive, and OI is also good and the change is not coming much, so the first thing you know is that there is resistance, it is also going up, as we have seen that it went up by 20-25points, the price went up to 43521 or 25 and then it fell, so it can go up by 20-25 points, it is ok, now what is important,
whenever you see that the price is going up, then see one more thing that the trap is not being created here, how will you know this trap, you can find out this trap if you see a strike of at least 500points above it, because the big institutions work in multiples of 500 points, so what you see is that if the percentage of change in OI has increased suddenly and the open interest is increasing there,
I will tell you what it means, it means that there is a sale, that institution player must have bought 44000 to hedge, if this OI is increasing there, then I am explaining the meaning to you, whenever an institution trades, it hedges its position, if it sells 43500, then it will buy it, if it sells it, then it will buy above it, and if you see a spike above 500 or 1000 quantities, that there is a spike here, it means that a trap is being created, the price may go up little and then it will fall down,