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Short, honest explainers for Indian options traders. Education only.
What is implied volatility (IV)?
Implied volatility is the market's own estimate of how much a price will swing, worked backwards from option prices.
IV rank vs IV percentile
Both tell you whether today's IV is high or low compared with its own past, but they are calculated differently.
Expected move: the range options imply
The expected move is the size of move that option prices imply up to expiry. It is a range, not a forecast of direction.
What is max pain?
Max pain is the strike at which the total payout to option holders at expiry would be the smallest.
Put call ratio (PCR)
PCR compares put activity with call activity. It is a mood gauge with conflicting readings, not a signal.
What is a straddle?
A straddle is a call and a put at the same strike and expiry. It is about the size of the move, not the direction.
How options expiry works
At expiry an option stops trading and is settled. What happens next depends on the instrument.
Why most F&O traders lose money
SEBI's own study found that about 9 in 10 individual F&O traders lost money (FY22 to FY24).
Theta decay: time value melting away
Theta is the amount an option loses in value each day just from time passing, all else equal.
Gamma flip: an estimated pivot, not a prediction
The gamma flip is the estimated price level where net dealer gamma changes from positive to negative.