Option Chain Analysis - Open Interest Analysis, Implied Volatility & Volume Analysis
Welcome. To the option chain analysis video so, today's, video is a follow-up video of open, interest put call ratio and, implied, volatility, video that was released earlier in, this, particular, video we will be looking at application, of concepts we discussed earlier and I will be showing you two new concepts, with respect to open interest and implied, volatility, in options, trading in case, you have landed directly on this video I would strongly recommend for you to start with part 1 of option, trading strategy series once, you finish this video link, to all these videos is in the description, box below link. To the basics of open interest analysis, put call ratio and, implied. Volatility, should come up at top end of your screen in these, video I have covered basics, and rules for option, chain analysis, do, watch these videos if you haven't already. So. Today we will take up November. 2018. Series. Of nifty based on what we discussed in the earlier videos last. Two videos on option, chain analysis were more about basics, of open interest implied. Volatility, and put, call ratio and, some of its applications. Today's. Video is entirely, about application, of what we discussed earlier and I will be telling you which data points, are the most important. Among open. Interest IV put call ratio and price I'll. Also be showing you two new, concepts, that are vital for option, chain analysis, and price analysis, so, these two concepts, are number one impact, of a single session on price trend and how, to use cumulative, open, interest chain charts to, stay on track and number, two how, to approach, option, chain analysis, in the last seven days of a series leading up to the expiry, these. Two important, concepts I had left out in the previous two videos as, I, wanted to cover. The basics first and I wanted you to understand, them thoroughly by, the time you end this video you will have a deep understanding of how to link open. Interest implied, volatility, and price together for, an entire, trading, series, again, I will strongly, encourage, for you to watch this video multiple, times to, learn these concepts, thoroughly so let's get started so. Let, us first begin with November 2018, expiry, series for P which lasted, between October, 26th, to 29th, November, in this, video I have explained, open interest analysis, implied volatility, and price, analysis, from October, 29th, to November, 28th now. Towards the end of this video I will explain how to analyze, option, chain and price, in the last five to seven days of a series in the, first segment of this video we will be looking at open interest and price and in, the second segment we will link this up with implied, volatility, so. The chart that you see in front of you is a snapshot of open interest on October 29th, upper, panel that you see is the total open interest for the series whereas lower panel, is open interest change, for the day range. For the market as per open, interest is 10,000. To 11,000. So, at the beginning of the day price was at 10000, 75, as, session, progressed, price moved from ten thousand seventy five to ten thousand, 275. We will come to the price analysis segment, in the late next slide but. Look what has happened at ten thousand, ten thousand one hundred and ten thousand two hundred P as, price, has moved higher strong, open interest edition was seen across. All these, three strike prices, some. Reduction, was also, seen at ten thousand, one hundred call option and ten.
Thousand, Five hundred call option if, you look at the price analysis, for October 29th, again strong demand, candles are present on the chart strong. Demand candle, is when range of a candle is wide and close is strong, towards the high point or low point of the day in the chart in front of you I have posted two separate, candles that represent, a strong demand candle and a strong supply candle, to, depict the price action for October 29th, I have posted candle, volume, chart, for you where. Width of the candle is dependent. On volume, of that candle the higher the volume the wider the candle, now, candle, volume charts are different, from candlestick, charts as they incorporate. Volume, within candles, again this, form of charting is a very, powerful concept, it's. Very clear from the chart that the to demand, candles, that we have here have, had significant. Volume associated with them we, are therefore taking, confirmation, from interest. Price and volume, again, this is something I did not include last time in the, two videos I released as I, did not want to introduce too many things at once but I hope now you can see how powerful this concept, is in terms of visually, seeing price action for a day and then, linking it with open interest activity, for the day implied. Volatility, part as I said, we will be covering few, slides later. This. Job that you see in front of you is the open interest snapshot, for October 30th now, based on open interest range for price still remains at ten thousand, and eleven thousand. Price, as of 29th, October, that is previous session stood, at ten thousand, two hundred seventy, five now. During the day when price struggled, to move above, ten thousand three hundred strong. Open, interest edition was seen at ten thousand, three hundred call option, open. Interest edition was also seen, at ten thousand, and ten, thousand, two hundred put, option on any. Given day if you had looked at this data of open interest you, would conclude that resistance, for the market is at ten thousand, three hundred and it, would be difficult for market, to move higher however. Before, reverting, back to this data point let us move first to price action analysis, if, you look at price action analysis, for October thirtieth while, price has moved lower, there, is no significant. Supply candle, that is visible also. Price in its previous session has, formed, a structure, of higher high which, in itself is a bullish, indication. Despite. A fall, in price here two. Things you have to consider number, one lack of volume. And number. Two both calls, and puts have witnessed, open, interest edition if indeed. Price has to move lower then, our next session price, would need to move lower with high, volume, and further. Open, interest edition would need to happen at calls preferably. Along. With open interest reduction, at puts I hope, this particular point is clear so, technically you have to understand, one thing that sustained, fall, in prices, almost always, requires.
Strong, Volumes, price. Can, rise with limited, volume. Especially in the middle portion of a trend but for price to fall on a sustained, basis, lot, of volume is required, do remember this important, concept of price action. This. Chart that you see in front of you is the open interest snapshot, for October, 31st, now, based on open, and interest range. For price has now moved from 10,000. To 11,000. To, ten thousand, to ten thousand. Seven, hundred range. Shift has seen here for the first time now. Price as of October, thirtieth stood at ten thousand, two hundred fifty now. Whenever you see range shift happening based on open interest which is in this case you. Need further confirmation, from, price now. What happens is that at times range shift happens, but, there is no follow-up or follow-through and therefore. You should only draw conclusions. Once price, confirms, so. During the day price, moved, towards, ten thousand, three hundred fifty and while, this was happening strong, open interest, addition, was seen at ten thousand, two hundred P ten. Thousand, three hundred P and ten. Thousand, four hundred P this, was also followed, up by open. Interest reduction, in ten thousand, two hundred call, option and ten. Thousand, three hundred call option if you, look upon, interest addition has also happened, at eleven. Thousand call option but, like I explained, in the previous videos, this, has to be ignored. Always. Remember that when open interest build-up, happens, at one, side of the market for, sustained, trend to develop open, interest, reduction. Has to happen on the other side of the market within one to two sessions this, is a very important, rule which, I had mentioned in the earlier two videos as well let. Us now look at price analysis. For this particular, session that is October 31st if. You. Look at the price analysis, for October, 31st price. Has moved, significantly. Higher, after, we have had a strong supplied. Candle, now, volume on the downside initially, was strong but, as open, interest build-up increased, at puts price. States have come back on back of strong, volumes, this. Was again a bull, signal if you, see prices. Also completed, a structure, of higher, high and higher, low. While. Closing at. 10350. For the day the, caveat, here is how, you should deal with the session like October, 30th, where, one day's open interest activity, was suggesting, resistance.
Ahead And then in today's session price. Has moved higher, such. Days usually confuse. A trader and there should be a way to deal, with such, sessions I'll, just show you what I mean here so look what has happened on October 31st price, has moved up on October, 30th. Price. Actually, moved down. With the kind, of consolidation, makeup but, look what had happened in the open interest segment there was huge open interest build-up at ten thousand, three hundred four hundred call option so. Typically when such days happen, traders do get confused, and miss. Out on these, sessions that usually, show up after such sessions and this, is what I am going to address in this particular, video in, the slides ahead I will show you how, to avoid, these. Sessions, this. Is also something that I had left, out in the last two videos. This. Chart that you see in front of you is the open interest snapshot, for November 1st now. Based on open interest range for price still remains at ten thousand, and ten, thousand, seven hundred price. As of 31st, October, that is last session closed. At ten thousand three hundred fifty now. During the day price consolidated. Between ten thousand three hundred seventy five and ten, thousand four hundred thirty now, as price, was consolidating. Put. Open interest edition was happening at ten thousand P and ten, thousand, four hundred P mainly, however. Again. Open, interest Edition was happening at ten thousand, four hundred call option so, again this is very similar to what we saw on October. 30th, where. Open. Interest edition was happening, in calls, and yet on, October. 31st we saw market, moving higher so. What I will do is let us first move to price analysis section, for, this particular day and then I will show you how. Open, interest analysis, of such individual. Sessions, should, be analyzed, so that you remain on the right side of the market. If. You look at the price analysis chart for November first price has just remained, in a range no, significant, price activity has taken place while price has moved in a range and while. We have seen open interest addition, happening in calls if, you see there, is no strong, demand, or supply candle. That has played out in this particular range so. Now we come to the most important, point that is how to deal with such sessions where price is suggesting. Mere consolidation. And open. Interest analysis, were suggesting, something else in terms of open. Interest Edition happening, in calls, now, such sessions usually, throw traders off track, and now, I will show you how to deal, with such, particular sessions, in the, last two videos I had introduced you to the concept of cumulative, open, interest chain charts however. I left, out why it is useful to use cumulative. Charts and when to use such, charts, in options, trading, the. Main reason, to use cumulative charts, is to see the underlying, bias, of the market, while, limiting, the impact, of single. Sessions, on underlying, market, and its trend this, way as a, trader you will not get influenced, by one single session and you, will always stay with the underlying, trend let, me show you how, this. Chart that you see in front of you is the cumulative open, interest chain chart between October, 29th, and November, 1st now. Let us recollect that on November 1st strong. Open interest edition, was seen at ten thousand four hundred call option similar. Activity, was also seen on October, 30th if you, look at the cumulative open, interest chain chart it is clear that as price, has moved from ten thousand, to ten thousand five hundred strong. Open interest edition has happened across put strike prices also, between. Ten thousand and ten thousand five hundred if you look at net open interest reduction, that has only happened in calls, if, you, encounter sessions, like November first you.
Should Realize that such, sessions. Should, be ignored as the overall, trend, of open, interest activity, still, suggests, underlying, bullishness. Also. We, have seen from price action analysis, that overall structure, of higher high was still intact and on, the upside we have seen strong, demand, candles, on candle, volume charts so, whenever you see a negative sessions, in term of open, interest or price first. See if both are confirming, the same and then. Look at cumulative open, interest chain chart to, see if underlying, trend is intact, or it, has changed, don't. Draw, conclusion, based on any one, single, session so. I hope now you see how powerful this concept, of cumulative open, interest analysis, is and how. To use this in your own analysis. I will be showing you in slides ahead how to use this again and again because, such single, sessions, do, come up repeatedly in, market. On on. Each series basis, I know, this, concept, will confuse, you a little bit in the beginning but once, you finish this video watch it again as you will understand, this concept even better with each viewing. Session, what, I will recommend is take a screenshot of, all these charts and then. Watch. This video again, this. Chart that you see in front of you is the open interest snapshot, for November 2nd now, based on open interest the range for price still remains between ten thousand, and ten thousand, seven hundred price. As of November 1st that is the previous session stood. At ten thousand four hundred thirty in today's. Session price, has moved up to ten thousand five hundred twenty about ninety points higher and strong. Open interest Edition has happened at ten thousand five hundred put option and ten, thousand six hundred put option we, have also seen open interest reduction happening at ten, thousand, four hundred call option ten thousand five hundred call option and mainly. Ten thousand six hundred call option now. Had it not been for the cumulative open, interest chain charts, we, would have never known the underlying, net bias of the market and would, have assumed, November. First session, as a negative, one given, how open. Interest Edition, had happened at ten thousand, four hundred call now.
Given That upper, range, hats moved. From 11. Thousand, to ten thousand seven hundred November. First session would have been viewed as a negative, one if one. Would have looked at it from stand-alone. Basis, now what I mean here is that couple of sessions back we. Saw that range from eleven thousand had shifted to ten thousand, seven hundred now. Someone who's trading in real time and who's, not looking at cumulative open, interest chain charts had, he seen strong. Open. Interest build-up at ten thousand four hundred call option, he, would have clubbed the open interest information, with, this range shift information, and would, have assumed, that market, is heading, lower so, this is where cumulative, chart is so powerful, as it, keeps you on the right side of the market again, and again let, us now move to the price analysis segment. For November second. So. If you look at the price analysis, for November second price, has moved higher. With the gap and then, consolidated. At the top end of the range again, the structure of higher high and higher low is still valid and trend. Of price is clearly, on the upside, if you, look at the candle, volume, chart strong. Demand candles, are easily, visible and relatively, there is no strong, supply. Candle, therefore. Price, along. With open interest have both indicated, a strong session. For the market in the direction of trend and do, not underestimate the, importance, of volume, here because. Repeatedly, we have seen that whenever price is heading, higher it, is heading higher with strong, demand candles, which, are easily visible, on candle. Volume, charts. This. Chart that you see in front of you is the open interest snapshot, for November, fifth now. Based on open interest range for price is at ten thousand, and eleven thousand. Range. Shift has happened on the upside if you see because earlier range was ten thousand, to ten thousand, seven hundred price. As of November second that is previous day stood at ten, thousand five hundred eighty now. As price, consolidated. Today's strong open interest edition was seen at eleven, thousand call option this, was the reason for range shift happening, in the market again. A clear indication. Of high levels to come given how open. Interest and price, structure has shaped up now. Whenever you see range shift suggested. By open interest try and see if recent, price, trend is confirming, the same and if, data of price and open interest will confirm the same in the next couple of sessions again. This is a very simple, yet effective, concept, when, it comes to option, chain analysis, let, us now move to price analysis segments to understand, November 5th better. If. You look at price analysis for November 5th price. Has moved lower with a gap, and then consolidated. To, close higher, near the November, 2nd top, end of range now, towards the end when price moved, back up volume. For the candle, was highest, for the day again, this is a very positive sign, this. Was again a bullish, session, it may not have reflected, in open, interest or price, as such but, the fact that price, moved, up after. Gapping, down along. With the range shift data that you saw on open, interest Club. Together this suggests that session, was, in favor of buyers and the. Underlying trend of the market which is up is still, prevailing. This. Chart that you see in front of you is the open interest snapshot, for November 6th now, based on open interest range, for price is still at 10,000. To 11,000. Price, as of November 5th that is previous session stood at ten thousand, six hundred in today's. Session that is November sixth price, attempted, to move higher and then closed lower towards. The end at ten thousand, five hundred twenty down. About 80 points from the previous session as. Price, fell open, interest edition was seen at ten thousand, seven hundred call option, now, again on standalone, basis, this, would suggest strong, resistance for the market again. Traders, who are looking. At this data point would, be concluding. That trend, might change in the market however, let. Us see what cumulative. Charts suggests, before. We move on to cumulative chart let us first look at price, action for November, 6th. So. On November 6th price starts, strong, as reflected.
Here, And then. It retraces, back strongly. To close near, the, November, 5th range if, you look at the supply, candle, it was backed by strong volumes. Again. Someone. Who looked at November 6th, open, interest activity, and price. Activity, would, have concluded, that odds, of price moving, higher would be largely, limited. However. That's, not the case let. Us again, revisit, the powerful, concept, of cumulative, open, interest change chart to, see how things shaped, up. If. You look at this cumulative change, chart it's, pretty, clear that. 10,500. Would, act as a very, strong, support, for the market it's, also clear that region, between ten thousand three hundred and ten thousand five hundred on the put side has. Attracted. Maximum. Open interest addition and this, will be acting as a strong, support, for the market even, though we have seen price, falling, on November. 6th while. Individual. Sessions, can be bearish. Overall. Impact, of same, on underlying, trend largely, remains, unaffected. I hope, now you see why you have to avoid. Extrapolating. The ill effects, of single, session on an entire, series, cumulative. Charts always, keep you on the right side of the market do, include, this concept, in your trading, now, some of you might be questioning, here that. While open. Interest change, has, happened on puts, it has also happened. On calls, there is no reduction as such well. The thing is yes. Open interest edition has happened, on puts, but, reduction, has happened, in calls between ten thousand and ten thousand, five hundred the. Open interest edition that you see, here, at out-of-the-money, strike, prices for calls it, may not be viewed as resistance. Mainly. Because you have to see, relatively. What puts. Have done and in. Compared. To puts what, calls, have done I hope, now you see how you have to analyze both, these data points together. This. Chart see in front of you is the open interest snapshot, for November 7th now, based on open interest range is at ten, thousand, and eleven thousand. Price, as of November sixth that is previous day stood at ten thousand five hundred fifty so. Just one hour of trading was recorded, in this session due to this being a truncated, session it was a moral trading session so, during this session we have seen open interest Edition, was seen mainly, in puts.
Price-wise. Nothing significant, happened again, it was a truncated. Session so price opened, higher and then. Stayed within a range for the next one R till the market closed no. Major change, as far as open, interest or price, analysis, is seen for, the time being in this particular day and observations. For November, 6th still, hold true, so. This is the open interest snapshot, for never 9th again. Based on open interest range for price is at ten thousand, and eleven thousand. Price, as of November seven that is the previous day closed at ten thousand six hundred thirty so. As price consolidated. With an upward bias in this session open. Interest edition was mainly seen at ten thousand one hundred put option along. With open interest edition at ten thousand seven, hundred ten, thousand, eight hundred and eleven. Thousand. Call option, so. Price, is at, ten thousand six hundred levels, so you don't, have to bother too much about what you see at ten thousand or ten thousand one hundred put option or call option strike prices but. Interestingly what, has happened today is while price, has consolidated, with an upward bias, more. Open interest edition has seen in calls. And there is no significant. Open, interest edition, ad puts, so. Typically when price consolidates. With the upward bias there has to be some open interest edition ad puts in case market has to in, case market is building a strong support or. A new base but this was not seen in this particular session of November ninth so. Based on price analysis, nothing much had changed structure. Of higher high and higher low was still intact and no, significant. Volume, was seen in today's session price. Largely, consolidated. In a range but remained. Positive. This. Chart that is she in front of you is open interest snapshot, for November, 12th so, based on open. Interest range for, price is at ten thousand, and eleven thousand. Price, as of November ninth that is the previous day stood at ten thousand six hundred fifty in, this, session you've seen price has moved lower, from, ten thousand six hundred fifty to ten thousand, five hundred there. Was open interest edition that was seen at ten. Thousand, six hundred call option, ten thousand seven hundred call option ten, thousand eight hundred call option and eleven.
Thousand Call option, so, in terms of open interest activity. This session does look very negative. Also, recollect. In the previous session there was no open interest edition and puts and mainly. Open interest edition happened, in calls, there's. Also been open interest reduction, in ten, thousand, five hundred ten, thousand, four hundred and. Ten. Thousand, three hundred put option we'll, take a look at cumulative open, interest chart to see if something has changed before. That let, us see how price, analysis, shaped up. So. In this particular session price, moved, lower from ten thousand six hundred fifty to. Ten thousand, five hundred if you look at the candle, volumes, there are strong, supply. Candle, visible. On the chart two, distinct, supply candles, are visible, on the downside, which are signifying, strong. Downward, momentum for, the day so. This session is again, very similar. To what we saw on October, 30th, and November. 1st and November. 6th the, important, question here is whether this day, or this session is important, or is it just an, aberration, in an ongoing trend. Well. Let us now go back to the cumulative interest, open interest change chart to check this out price. For this particular session closed, at ten thousand, five hundred twenty five. So. This is the cumulative open, interest change chart that you see in front of you with price at ten thousand five hundred twenty five maximum, open interest is at ten thousand five hundred four puts and for calls it is at eleven, thousand, while, price has closed negatively, for November 12th there is no, significant. Change in terms of open interest structure, now let me explain this, to you while. Open interest addition at ten thousand, five hundred and eleven thousand, is strong it's, important, to note that open, interest reduction, is mainly, noted in ten thousand four hundred call option and ten. Thousand five hundred call option, if price. Indeed, had to move lower such. Strong support, at ten thousand, five hundred put option in terms of open interest shouldn't. Have existed, also. With. Price at ten thousand five hundred twenty five you, are seeing no substantial. Addition, in open, interest in calls that is for ten thousand 600, 700, 800 or, 900. The, only place where you see open interest addition for calls it is at eleven, thousand so. Clearly there are two things missing here one there. Is no resistance, in immediate. Call strike prices that you see and there. Is significant, support, in terms of open. Interest addition at ten thousand five hundred put option along. With the reduction that you have seen at ten thousand four hundred and ten. Thousand, five hundred call, option, so, I hope, this particular, point is clear that, from cumulative, open interest chart it, is relatively. Easy to stay on the right side of the market despite. Of having a negative, session, like November, twelfth now, it is easy to, see it now in hindsight I will. Acknowledge this, but. This is all about, practice, the, more you practice these concepts, the, more you see this playing in real time and the. More better you get at it eventually. There will come a time when this will be playing out in real time and you would know that how, you have, to stay on the right side of, the market so, again pay, attention to, this cumulative open, interest chain chart this. Is a extremely. Useful. Concept. So. This is the open interest snapshot, of November, 13th range, as per open interest is, 10,000. To, 11,000. In the, previous session we have seen that price has closed, lower at ten thousand five hundred twenty. On November, 12th in this, particular session you've seen significant. Put open interest Edition, that has happened at ten thousand two hundred ten thousand three hundred ten. Thousand four hundred and ten, thousand, five hundred put option this, is exactly. Opposite, of what we saw in previous session, open. Interest reduction was mainly seen at ten, thousand, five hundred call option ten thousand six hundred call option ten, thousand, seven. Hundred call option and at. Eleven, thousand call option so, had it again, not been for the concept of cumulative open, interest change chart one, would have assumed, that previous. Session that is in the number twelfth would, be extremely, negative, for the market and they, would have been whipsawed, today considering, how bullish, this. November. 13 session, looks once. Again cumulative open interest change charts helps, one to stay in the, right direction of, market.
I Can't. Begin to emphasize, how important. This concept, is in overall. Option, chain analysis, and this, is almost never, covered, anywhere. And I'd and I have not seen traders using this that often, so. This is the price analysis, chart for November, thirteenth price. Staged a remarkable, comeback to close higher on back, of strong momentum, if you look at the candle, volume, charts, clearly, one strong, demand, candle is visible, on the chart towards, the end of the day so, this strong demand, candle, essentially, countered, the strong, supply. Candle, that you saw in the previous session, price, has essentially. Moved back in a range had, it again not been for cumulative open, interest change chart, yesterday's. Session would have been considered, as very negative. As price. Had, also, breached this previous. Pivot, point so, I hope this particular, session is also, cleared to you so. This is the open interest snapshot, of November, 14th range as for open interest is 10,000. To 11,000. In this, session price has largely, consolidated. And closed near November. 13th price level of ten thousand six hundred sixteen, while. Consolidation. Happened ten, thousands, 600p. Added, the most open interest followed. By. 10900, call option so. 10200. Put option and, 10300. Put option did see open interest reduction, but, as seen in cumulative, charts, such, out-of-the-money, open, interest activity, inputs, are in call has, limited, effect over the very short term and these should be ignored, if, you, look at the price action chart, clearly, too strong, supply candles, are visible. But, open interest activity, was not bearish. And these, two supply candles, have formed, within. A structure, of higher hi always. Remember, that you are looking for price and open. Interest confirmation, and one either of the two does not confirm, stick, with the underlying, trend if with, trend you still have doubts then, do revert back to cumulative, open interest chain charts, to be certain, be, objective, in this case and don't let your emotions take over so. Let me repeat check, price analysis, and then, look at open interest analysis, if you, cannot, draw any conclusion. Check, cumulative. Open interest change chart there's, one key element missing, here and thatis, of implied, volatility. But, I will come to that towards. End of this, video. This. Is the open interest snapshot, of November, 15th range, as for open interest is 10,000. And 11,000. As price, consolidated. In this session between ten thousand six hundred and ten thousand seven hundred open. Interest edition, was seen at ten, thousand four hundred put option and ten thousand six hundred put option some. Open interest edition was also seen at ten. Thousand, seven, hundred call, but, on a cumulative chart, this would be irrelevant, open. Interest deduction, was seen at ten thousand, five hundred call option and ten. Thousand six hundred call option, important. Point here is that price has consolidated, while. Open, interest, build up at puts, has increased, if. You. Look at the price analysis, chart for November 15th price, has moved up by, about 20 points with respect to previous session. No significant, price action as such was seen demand. And supply candles, were largely absent, similar. To open interest data price data also suggests. Consolidation. Within a structure, of higher high and higher low, while. Dealing with open interest and price, analysis, you'll, have to be mindful of sessions, which create, doubt, in your mind you. Will have to then use cumulative, open interest chain charts, along. With price analysis, to keep such, sessions away, from altering, your overall, opinion, and position. In the market, this, actually essentially, forms, a very, crucial aspect. Of option. Chain analysis, that, is often, overlooked. So. This is the open interest snapshot. For November 16th, range, as per open interest is now at ten thousand, and ten thousand, eight hundred if you see upper, end of the range has now come down from eleven. Thousand to ten thousand, eight hundred, so, again recollect whenever you see such. Range, shift always, be mindful, and always, look for confirmation in, the next few sessions so. As session, progress today open interest Edition was seen at ten thousand six hundred and ten. Thousand, eight hundred P price. Actually closed at ten thousand seven. Hundred that is about sixty to sixty five points higher from the previous session and as, price, moved up open. Interest reduction, was seen at ten, thousand, five hundred and ten. Thousand six hundred call option again, this was a positive sign, price. Analysis, for November sixteenth was positive. Demand. Candles were in, place as price, moved sixty points higher you can clearly spot to, demand candles, here and structure. Of higher high and higher lower still sustaining, the. Important, thing that you have to note here in this. Particular session is that of range shift I'll be, explaining this particular, point in next few slides but, always be mindful whenever, you see range shift happening in market, in terms of open interest and then.
Try And look for price, confirmation. So. This is the open interest snapshot, of November, 19th, range, as for open interest is ten thousand, and ten, thousand eight hundred in. This session price has actually moved higher by 80 points, as prices. Moved from ten thousand six hundred eighty to ten thousand seven hundred sixty open. Interest edition was seen at ten thousand five hundred put option ten, thousand six hundred put option and ten thousand seven hundred put option, one. Thing to observe here, is that despite. Positive session, today and day. Before open. Interest edition has, happened, mainly at puts but, range for the market has still not expanded. On the upside ten, thousand eight hundred is still the upper range for now. Price. Moved higher on 19th November and actually closed at ten thousand, seven, hundred eighty the. Price structure was good and well, within the structure of higher high and higher low that we have been following, before. We move to implied, volatility, let, us recollect, till now what we have done from, October, 29th, to November nineteenth we have covered open interest, cumulative. Open interest change and price. Analysis. Now, between, November. 20th. And november, 29th. So. This chart is not complete, what I have done is from, here on November, 28th to November 29th, I have summarized, the chart here so. Between November, 20th, and november 29th. That is the expiry, price, has dipped from ten thousand seven hundred eighty to ten thousand five hundred and it has again moved back to ten thousand, eight hundred however. Between this period the, way you have to analyze, open, interest has to change now, this is the second, important, point of this video that is how, to cover open, interest and implied. Volatility, in the last seven, days leading, up to the expiry, this. Again I'll be taking up in the next few, slides so what I am doing here is that I am ending the open interest analysis, at November. 19th, because. These last seven sessions cannot. Be analyzed, this way there, are some changes that you have to make and that is what I'll be covering up, now so, before we move forward to implied volatility, section let, us now see, what cumulative, open, interest charts suggests this, is a snapshot of net open interest change between October, 29th, and November, 20th so. The net call, open interest change is 2.8. Million and the, net put open interest change is 9.5. Million clearly, the, bias as per open interest and price, analysis, is, bullish, between, October 29th, and November, 28th this, is also one of the reasons why after November, 20th you have seen price dipped, for 200 points and then again, move towards. This particular range, this, was as suggested. By cumulative, open, interest chart so, let us now look at what happened, with nifty, implied, volatility. Between, the same period that is October 29th, and November, 20th if you want you, can take individual. Implied, volatility. Of options, but, I would suggest to go with nifty, IV as this, is widely reported by brokers as well and is much, easy to procure nifty. IV is not the same as NSE. India VIX try, and use nifty, IV, as it is calculated. Using front. Month options, and it, represents, future, volatility, well, now, lot of you have asked me to Ares on this just. Prefer using nifty, IV for now and don't. Track individual. IVs move. To individual, IVs, only, once. You become more, experienced. In handling, implied. Volatility. So. Let us look at what happened to IVs, between, October, 29th, and November 20th so, this is the nifty IV chart so. Nifty eye we moved from nineteen, point eight one to. Fifteen. Point nine and, let's. Recollect, that neck put open interest change was nine, point, five million if, you note even, calls have added, open, interest but relatively. Look at how puts, have done open. Interest reduction, if you, see was mainly seen in calls between ten thousand and ten thousand, five hundred level. So. The relative analysis, of how calls, and puts behave. Is what makes open, interest IV, and price, analysis, very subjective so, what. We have seen here is that we have seen increase, in open, interest inputs. Along. With fall, in implied.
Volatility. As session. Has progressed, so, if you remember this was ruled 2 when it came to price and open, interest analysis, along. With implied, volatility. Analysis, and what, did rule to suggest rule, 2 suggested, that whenever increase. In open. Interest inputs, happen, along. With fall, in implied, volatility. And price. Confirming, the same that indicates, fresh, short, formation, or writing. Inputs, if you. Also note I have left out put, call ratio and, I will come to that in a bit but first let's, see how to deal with price, open. Interest analysis, and IV. In the, last seven, days leading, to expiry. So. During the last seven days leading, to expiry always, combine, open, interest for, current, month and next, month you. Can also view current data and next, month separately, if you don't want to combine both however, in your open. Interest analysis, you will have to start looking at next, series data as well. To understand, the bias, of participants. In the market now. Quite often there is a subtle shift in how participants, are positioned, and this, can only be seen if you combine, both series, together in the last seven, days so. Avoid looking at put call ratio of the next month till expiry, happens only stick, with the current month PCR, that is put call ratio there. Will also be no, change in how you look at IV, so, whatever IV data you are getting for the month stick with it change, is only applied. To open. Interest, as, far as price analysis, is concerned, only, focus. On current, month charts, till, the point expiry, happens. So. Let me now give you some practical, tips, as far as option, chain analysis, is concerned so, heading forward it's important, for you to see which combination works, best for you what, I would suggest is that always pay attention to open, interest cumulative, net change charts, these, charts, will always, help you stay in the right, of trend we, have seen countless times, in this video itself, how these charts, have made us stay on the right side of the market this, is a very powerful concept and try to master this, concept. In particular when, it comes to option chain analysis, I think, price, analysis, open interest analysis, and implied.
Volatility. Are the most crucial, ones this. Is the combination, that has worked best for me and I practice, this on a regular basis, I would, actually assign price, analysis, about 40%. Of weight, open. Interest analysis, about 30%. Implied. Volatility, about 20%, and PCR just about 10%, remember. One thing that PCR, should only be taken as a supplementary. Indicator, and my in my opinion it is the least important. Out of all these that we have discussed and this, can be ignored as well in. Case you're a beginner, in option chain analysis, you, can start, to consider, PCR, at a later stage if it causes confusion at, present, the, way you have to proceed here is to try and watch this video two times today and then. One time tomorrow this, is an enhanced, way to learn a concept and I have highlighted the importance, of doing this earlier, as well I will, be uploading more videos on, option, chain analysis, but, those would be the trades I take and when, I take those trades I'll make a case study out of it whether, it ends up in profit, or in, a loss the. Key here again is to practice, and to, take notes and to, always, pay attention to the concept of cumulative open, interest chain chart so. If you find this video were that kind kindly, consider sharing it and kindly. Consider hitting the like button as well so, thanks a lot for watching this video guys in case you have any doubt do let me know in the comment section below see, you next time take care and be safe click, on the subscribe button and pellicle. Instantly, notified, when a new video is uploaded thank. You for subscribing.