What is Option Chain? - ITM, OTM, ATM Explained in Digitalgkaa- If you want to trade in Options in the stock market, you must know about Option chains
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What is an Option Chain?
If you want to trade in Options in the stock market, you must know about Option chains. Now let us look at the option chain related to Nifty. What you see here is called Option Chain.
Option Chain has Strike Prices in the middle. Also in the previous article, there are two types of options.
1. Call Option (CALLS)
2. Put Option (PUTS)
The Strike Price in the Options Chain has called on the left and PUTS on the right.
For an easy understanding of this option, chain let us first look at the left side i.e. CALLS only.
The spot price is 14617. Carefully note that in the Strike Price near 14617 there is a color (Yellow) at the top and a color (White) at the bottom in the Calls section.
In The Money (ITM) is also known to have Strike Prices that are lower than the Spot Price when it comes to calls.
Out Of The Money (OTM) are also known to have strike prices that are higher than the Spot Price
Any one of the Strike Prices equal to the Spot Price is called At The Money (ATM).
The In The Money (ITM) area is slightly yellow in color for easy detection. Out Of The Money (OTM), the area is all in White Color. Wherever Yellow Color & White Color meet it is At The Money (ATM).
All this you can see clearly in the photo.
Then there are the Puts when it comes to the right. It is against Calls.
In The Money (ITM) are also known to have Strike Prices that are higher than the Spot Price when it comes to Puts.
Out Of The Money (OTM) is also known to have Strike Prices that are lower than the Spot Price.
Calls and Puts are opposite In The Money (ITM) & Out Of The Money (OTM).
Key Points
1. Premiums for Option Contracts in In The Money (ITM) are high.
2. The premiums in OTM decrease as you move away from At The Money (ATM).
3. By the time of expiry, all the Options Premiums in Out Of The Money (OTM) will be Zero. So they have no value.
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