How to Read an
Option Chain
The option chain is the single most information-dense screen in derivatives trading. This guide breaks down every column — strike, LTP, open interest, change in OI, volume, implied volatility, PCR and max pain — and shows you how to read them together, using a worked NIFTY example.
What is an option chain?
An option chain (also called an option matrix) is a live table that lists every tradable call and put contract for an underlying — an index like NIFTY or Bank Nifty, or a stock like Reliance — across all available strike prices for a chosen expiry. By convention, calls sit on the left, puts on the right, and the strike prices run down the centre.
Each row corresponds to one strike. For both the call and put side it shows live fields such as last traded price, open interest, change in open interest, traded volume, implied volatility and bid/ask. Read correctly, the chain tells you where positions are building, where the market sees support and resistance, and how expensive options currently are.
The columns, explained
- Strike price — the price at which the option can be exercised. Strikes are listed at fixed intervals (for NIFTY, every 50 points).
- LTP (Last Traded Price) — the premium the option last traded at. This is what you pay (buyer) or receive (seller).
- Open Interest (OI) — the total number of outstanding (not-yet-closed) contracts at that strike. High OI marks strikes where a lot of money is positioned.
- Change in OI — how much OI rose or fell during the session. This is often more useful than raw OI because it shows fresh activity.
- Volume — the number of contracts traded today. High volume with rising OI confirms genuine new positioning.
- IV (Implied Volatility) — the market's expectation of future volatility priced into the option. Higher IV means richer premiums.
- Bid / Ask — the best buy and sell quotes. A tight bid-ask spread means good liquidity.
Moneyness: ITM, ATM and OTM
"Moneyness" describes where a strike sits relative to the current spot price:
- ATM (At The Money) — the strike closest to the current spot price. ATM options have the most time value and the highest sensitivity to moves.
- ITM (In The Money) — calls below spot / puts above spot. They carry intrinsic value.
- OTM (Out of The Money) — calls above spot / puts below spot. They are cheaper and made up entirely of time value.
Reading open interest: support and resistance
Open interest is where the chain earns its keep. Option writers (sellers) take on obligation in exchange for premium, so the strikes where they pile in tend to act like walls:
- Highest call OI often acts as resistance — call writers there are betting price stays below that strike.
- Highest put OI often acts as support — put writers there are betting price stays above that strike.
Pair OI with price to classify the buildup:
- Long buildup — price up, OI up (fresh buying).
- Short buildup — price down, OI up (fresh selling).
- Short covering — price up, OI down (sellers exiting).
- Long unwinding — price down, OI down (buyers exiting).
PCR and max pain
PCR (Put-Call Ratio) = total put OI ÷ total call OI. It is a sentiment gauge read relative to the instrument's own recent range, not against a fixed number. Persistently high PCR can flag oversold/contrarian-bullish conditions; very low PCR the opposite.
Max pain is the strike at which the largest number of option buyers would lose money at expiry — i.e. the point of maximum loss for buyers and maximum gain for writers. Price often drifts toward max pain as expiry approaches, which is why traders watch it on expiry day.
A worked NIFTY example
Suppose NIFTY spot is around 22,500 (illustrative numbers). You scan the weekly chain and notice:
- The 22,700 call has the highest call OI with a large positive change in OI → resistance building above.
- The 22,300 put has the highest put OI with rising OI → support building below.
- PCR is mid-range and IV is steady.
The read: the market is pricing a likely range of roughly 22,300–22,700 into expiry, with writers defending both edges. A trader might treat moves toward 22,700 as resistance and toward 22,300 as support — until a decisive OI shift (e.g. heavy unwinding at 22,700) signals the range is breaking.
Common mistakes to avoid
- Reading raw OI without change in OI — yesterday's positions may already be stale.
- Treating PCR as an absolute buy/sell trigger instead of a relative gauge.
- Ignoring liquidity — a great-looking strike with a wide bid-ask spread is hard to trade.
- Forgetting that support/resistance from OI can move intraday as writers adjust.
See it live, free
Put this into practice on TradePulse's live NIFTY option chain — real-time OI, change in OI, PCR, max pain and IV, with AI commentary that explains what's shifting.