Quick Answer: What Is an Option Chain and How Do You Read It?
An option chain is a table listing every call and put contract for one underlying and one expiry, laid out by strike price. Reading it means checking where positions are concentrated and where new ones are being added. These terms cover most of what you need to know:
- Option chain
- A table of all call and put contracts for one underlying and one expiry, with calls on the left, strike prices in the middle and puts on the right.
- ATM strike
- The at-the-money strike is the one nearest to the current spot price, and the most useful action usually sits within a few strikes of it.
- Open interest (OI)
- The number of contracts still open at a strike. The highest call OI above spot and the highest put OI below spot are often watched as possible resistance and support.
- Change in OI
- Contracts added or closed at a strike today, showing where new positions are being built and where they are being unwound.
- Put-call ratio (PCR)
- Total put open interest divided by total call open interest. A reading near 1 is generally seen as balanced, and the trend through the day matters more than one number.
- Max pain
- The strike where the total payout to option holders at expiry would be smallest. It is a reference level that matters mostly in the last few days, not a prediction.
- Implied volatility and liquidity
- IV shows how expensive options are and how that differs across strikes (skew), while the bid-ask spread shows your trading cost, so prefer tight spreads near ATM.
What you will learn
- How an option chain is laid out and how to find the ATM strike
- How to read open interest and change in OI to spot possible support and resistance
- How to calculate PCR and find max pain, and what each can and cannot tell you
- How to check implied volatility and liquidity before choosing a strike
- How to combine these readings with price action, and the mistakes to avoid
What Is an Option Chain?
An option chain is a table of every call and put contract available for one underlying and one expiry, arranged by strike price. For each strike it shows the premium, open interest, volume and implied volatility, which makes it the quickest way to see where option traders are positioned. You can view it on the NSE website and on your broker platform.
Visualising It: How an Option Chain Is Laid Out
Calls sit on the left, puts on the right and strikes run down the middle. Shading shows which strikes are in the money. Illustrative data, not a live option chain.
This guide walks through the chain in nine steps. It uses one illustrative sample chain throughout: spot at 24,000, seven days to expiry. New to calls, puts and Greeks? Start with the Options Trading for Beginners guide.
Step 1: Choose the Underlying and Expiry
Pick the index or stock, then the expiry. Nearer expiries have more trading, tighter spreads and faster time decay; farther expiries show longer-term positioning. Open interest on a weekly expiry mostly reflects short-term trades, so compare it with the monthly expiry before reading too much into it. Exchanges change expiry days and contract sizes from time to time, so check the current schedule.
Step 2: Find the Spot Price and the ATM Strike
Note the spot (or futures) price, then find the at-the-money (ATM) strike, the one nearest to it. Strikes below spot are in the money for calls; strikes above spot are in the money for puts. In the sample, spot is 24,000, so the 24,000 strike is ATM. The most useful action happens within a few strikes of ATM, so start there and expand outward.
Step 3: Learn What Each Column Means
| Column | What it shows | Why it matters |
|---|---|---|
| LTP | Last traded price of the option | The premium you would pay or receive |
| OI | Contracts still open at that strike | Shows where positions are concentrated |
| Change in OI | Open contracts added or removed today | Shows where new positions are being built |
| Volume | Contracts traded today | Shows current activity and liquidity |
| IV | Implied volatility built into the price | Shows how expensive the option is |
| Bid and ask | Best buy and sell prices in the market | The gap is your trading cost |
Step 4: Read Open Interest
Look for the strikes with the largest OI. The highest call OI above spot is often treated as possible resistance, because many traders have sold calls there and will defend the level. The highest put OI below spot is treated as possible support for the same reason. In the sample, that gives a put wall at 23,800 and a call wall at 24,300.
Visualising It: Open Interest by Strike
Put OI peaks at 23,800 and call OI peaks at 24,300, so option writers appear to be positioned for a range between them. Illustrative data, not a live option chain.
Here is the full sample chain. Shaded cells are in the money; the red and green cells mark the call and put walls. OI and change in OI are in lakh contracts.
| Call OI | Call chg OI | Call IV | Call LTP | Strike | Put LTP | Put IV | Put chg OI | Put OI |
|---|---|---|---|---|---|---|---|---|
| 6 | -1 | 15.2 | 484 | 23,600 | 54 | 15.2 | +6 | 74 |
| 8 | -2 | 14.9 | 403 | 23,700 | 74 | 14.9 | +9 | 58 |
| 12 | -3 | 14.6 | 329 | 23,800 | 99 | 14.6 | +21 | 90 |
| 18 | +2 | 14.3 | 261 | 23,900 | 131 | 14.3 | +12 | 63 |
| 40 | +8 | 14.0 | 201 | 24,000 | 171 | 14.0 | +5 | 47 |
| 52 | +14 | 14.1 | 155 | 24,100 | 225 | 14.1 | -3 | 22 |
| 61 | +19 | 14.2 | 117 | 24,200 | 286 | 14.2 | -2 | 14 |
| 84 | +26 | 14.4 | 86 | 24,300 | 356 | 14.4 | -1 | 9 |
| 70 | +11 | 14.5 | 62 | 24,400 | 432 | 14.5 | +0 | 6 |
Every contract has a buyer and a seller, so OI alone cannot prove who is on which side. Treating high call OI as writer-driven resistance is a convention that works often, not a certainty.
Step 5: Read the Change in Open Interest
OI shows the stock of positions; change in OI shows what is happening today. Adding OI means new positions are being opened; falling OI means positions are being closed.
Visualising It: Where OI Is Being Added and Closed
Call OI is being added above spot and put OI below spot, which strengthens the range. A few strikes show unwinding. Illustrative data, not a live option chain.
| What you see | Common reading |
|---|---|
| Call OI rising at a strike above spot | Call writing; resistance is building |
| Put OI rising at a strike below spot | Put writing; support is building |
| Call OI falling while price rises | Short covering; resistance is weakening |
| Put OI falling while price falls | Support is weakening as puts are closed |
| Both call and put OI rising around the same strikes | Traders expect price to stay in that zone |
Step 6: Calculate the Put-Call Ratio (PCR)
In the sample, total put OI is 383 lakh and total call OI is 351 lakh, so PCR is 1.09, close to balanced with a slight lean toward puts.
| PCR (rule of thumb) | Common reading | Caution |
|---|---|---|
| Well above 1 | More puts than calls; often read as supportive | Extreme readings can mean crowded positioning |
| Around 1 | Balanced positioning | Look at OI walls for detail |
| Well below 1 | More calls than puts; leans bearish | Extremes can also signal an overheated market |
Thresholds differ between indices and stocks, so track how PCR changes through the day and across days instead of relying on one number.
Step 7: Find Max Pain
Max pain is the strike at which the total payout to all option holders at expiry would be the smallest, in other words where option buyers as a group lose the most. The theory is that price may drift toward it into expiry. To find it, calculate the total intrinsic value owed to call and put holders at each possible expiry price and pick the lowest.
Visualising It: The Max Pain Strike
Total payout is lowest at 24,000, so that is the max pain strike for this sample. Illustrative data, not a live option chain.
Treat max pain as a reference. It matters mostly in the last few days before expiry, and its evidence as a predictor is mixed. In this sample it sits at spot, so it adds no extra information.
Step 8: Check Implied Volatility and Liquidity
Compare IV across strikes. Puts far below spot usually carry higher IV than calls at the same distance above spot, a pattern called skew. Rising IV before an event means premiums are getting expensive; falling IV after it can shrink premiums even when direction is right. See Vega and implied volatility for detail.
Then check liquidity. A wide gap between bid and ask, or very low volume, raises your cost of entering and leaving. Prefer strikes near ATM with a tight spread, and use the volume signals in the Volume Analysis guide to confirm activity.
Step 9: Put It Together
Combine the readings into one picture. For the sample chain:
- Structure: put wall at 23,800, call wall at 24,300, spot in the middle.
- Flow: new call OI is being added at 24,200 to 24,400 and new put OI at 23,700 to 23,900.
- Sentiment: PCR 1.09, balanced. Max pain 24,000, at spot.
- Read: option writers appear to expect a range of roughly 23,800 to 24,300. A close beyond either wall, especially with OI unwinding there, would challenge that view.
Then take it to the price chart. The option chain shows positioning, not a signal. Use it to frame levels and risk, and enter only when price action, volume and your stop-loss agree. Candle confirmation is covered in the Candlestick Charts guide.
Common Option Chain Mistakes
Treating OI walls as guarantees
Walls can be breached or shifted. When price closes through one, the level has failed.
Reading OI without change in OI
Old positions can be stale. Fresh additions and unwinding show today's activity.
Relying on one PCR number
Track the trend in PCR, and combine it with strike-level OI.
Assuming price must go to max pain
It is a theory, not a magnet. Do not trade it on its own.
Ignoring the bid-ask spread
An illiquid strike can cost more to exit than the trade is worth.
Trading the chain without the chart
The chain shows positioning, not entries. Confirm with price and volume, and use a stop-loss.
Your Option Chain Checklist
Run this five-point check every time you open a chain:
Right expiry and ATM
Have you chosen the expiry you care about and located the ATM strike?
OI walls
Where are the highest call OI above spot and the highest put OI below it?
Change in OI
Is OI being added or closed at those walls today?
PCR, IV and liquidity
Is PCR trending, is IV high or low, and is the spread tight?
Chart and risk
Does price action agree, and do you know your stop and maximum loss?
Learn the Stock Market with Deepak Kevadia: Boisar, Dahanu, Palghar & Online
This guide is part of the free learning library from Chart Code, founded and mentored by Deepak Kevadia (BSE NISM Certified). Understanding how to read an option chain is step one; combining it with price action, position sizing and risk on live charts with a mentor is step two. Chart Code's trading course is taught in person at Boisar and live online, so students from Boisar, Dahanu and Palghar, and anywhere in India, can join.
- In person: 208, Yash Padma Arcade, Boisar Tarapur Road, Boisar, Palghar, Maharashtra 401501
- Online: live sessions from anywhere in India
- Contact: +91 95121 00588 (call or WhatsApp) · chartcode.in@gmail.com
Explore the trading course · Meet Deepak Kevadia · More free guides