Learning outcomes

After this module you should be able to:

1. Read every column of an NSE option chain, build the chain from the F&O bhavcopy, and infer the forward from put–call parity rather than from spot (9A.1).
2. Decompose an option's daily price change into delta, gamma, theta and vega parts, and explain why the four OI build-up labels are a weaker signal for options than for futures.
3. Define the OI and volume put–call ratios and max pain exactly; prove that max pain is the strike at which cumulative call OI below equals cumulative put OI above (Proposition 9A.3), and test "expiry pins to max pain" on data.
4. Derive the effective volatility of a price driven by dealer delta hedging, state the pinning evidence (Avellaneda–Lipkin, Ni–Pearson–Poteshman, Golez–Jackwerth), and say what Indian data can and cannot reveal about dealer gamma.
5. Derive the ATM straddle $\approx 0.8\,F\sigma\sqrt\tau$ with its error term, relate it to the expected absolute move, and extract an event's implied variance from two expiries (Propositions 9A.5, 9A.6, 9A.9, 9A.10).
6. Compute IV rank and IV percentile, and prove that the percentile is uniform under exchangeability while the rank is not.
7. Read the participant-wise OI file and state its accounting identities and its limits.
8. Compute a SPAN-like scenario margin for a multi-leg position, prove that it is subadditive and capped for defined-risk spreads, and analyse rolling, strangle-to-condor conversion and delta-neutral adjustments as changes of Greeks with explicit costs; state the obligations created by physical settlement of stock options.