Option Chain

Generally speaking option chain is a list of all available options and their call and put strike prices. It includes many more variables that have a host of information that requires analyzing and understanding by a trader in order to buy an option. Experts that make loads of money from the forex market can be seen filtering information contained in this list by screening the various variables and gauging their effect on the movement of price of a currency pair at a future date.

Each currency pair has its own option chain that displays the number of option contracts available in the market, the expiration dates for the same, their premiums and the number of call and put contracts. With other variable such as open interest and strike prices, a trader that can read and understand option chain and the information contained can easily establish his position in the market for a single currency pair or multiple currency pairs as per his choice.

Trading in the market revolve around the current price of the currency pairs and option chain gives complete information of the current market price of the currency pair and various strike prices and their expiration along with the number of call and put contracts at a particular strike price.

For experienced and seasoned players understanding option chain may not be difficult however for a novice before understanding option chain it is essential to understand some of the terminology used in the same.

Strike Price: This is the price that the currency pair can be bought or sold by the traders.

Symbol:  They are the identification code for a currency pair and indicate options strike price and expiration date.

Last: This the market price of the option

Volume: This shows the number of contracts exercised in a trading day

Open Interest: Is the number of open contracts for a currency pair in the market. Exercised or sold contracts are excluded from this number.

Ask and Bid Column:  The price indicated in the bid column shows the price at which the options are sold in the day while the ask price indicates the purchase price of available options for the day.

Now it is important to understand that when you open an option chain at a trading platform a default option chain setting is displayed with many columns showing different types of variables. For an expert understanding of all kinds of variable is important but for a start a trader can usually add or delete the columns to be displayed on the screen as it is customable. There are separate sides for call and put option trades and a trader can individually view his or her desired part with each call or put strike price, open interest , volume etc  having a separate and distinct symbol to distinguish it from the other. Now a trader can choose to pull out his columns of interest and view and analyze the option trade and place his trade accordingly.

Understanding option chain is critical to achieving financial gains in forex option market as the chain provides vital information that helps traders calculate the possible movement in recent future and also possible outcome of trades.