How to Read an Option Chain: A Beginner's Walkthrough
Open any NSE option chain for the first time and it looks like a wall of numbers. Two blocks of columns, a strike price sitting in the middle, and dozens of rows of figures that change every few seconds. Once you know what each column means, the same chain becomes one of the fastest ways to read what traders are actually positioning for. This walkthrough breaks it down column by column, so you can open a live chain and follow along on your own screen.
The basic layout: calls, strikes, puts
Every option chain is built around a single column in the center, the strike price. This is the price level at which the option gives the buyer the right to transact. To the left of the strike column sit the call options (CE, or Call European), and to the right sit the put options (PE, Put European). This left-right split is standard across every NSE chain and every broker platform, so once you recognize it, you can read any chain, not just one specific app's version.
For NIFTY and BANKNIFTY, strikes are listed in fixed gaps, usually 50 or 100 points apart for NIFTY, wider for BANKNIFTY. For stocks, gaps vary depending on the stock's price. Each row is one strike, and that row shows you the complete call-side and put-side data for that strike, side by side, for whichever expiry date you have selected at the top of the chain.
What each column means
Reading left to right on the call (CE) side, and then mirrored on the put (PE) side, a standard chain shows:
- LTP (Last Traded Price): the current premium, the price you would pay to buy that option right now, quoted per share, though it trades in lot sizes.
- Change: how much that premium has moved, in points and percent, usually since the previous day's close.
- OI (Open Interest): the total number of option contracts at that strike that are currently open, meaning bought or sold and not yet closed out. This is a position count, not a trade count.
- Change in OI: how much that open interest has moved during the day, rising OI means new positions are being added, falling OI means positions are being closed.
- Volume: how many contracts have traded at that strike today. Volume can be high even if OI barely moves, if traders are entering and exiting the same strike repeatedly.
- IV (Implied Volatility): the market's estimate of how much the underlying is expected to move, expressed as an annualized percentage. Higher IV means costlier premiums.
- Bid/Ask: the best price a buyer is currently offering (bid) and the best price a seller is currently asking (ask). The gap between them is the spread, tighter spreads mean easier entry and exit.
The put (PE) side repeats the exact same set of columns, just mirrored, so a put's LTP, OI, IV and volume sit on the other side of the same strike row.
Finding ATM, ITM and OTM
Most chains highlight or shade the row closest to the current underlying price, this is the ATM (at the money) strike. It is not a fixed strike, it moves as the underlying price moves through the day.
Strikes are ITM (in the money) or OTM (out of the money) depending on which side of the current price they sit, and this works in opposite directions for calls and puts. For calls, strikes below the current price are ITM, they already carry intrinsic value, and strikes above the current price are OTM. For puts, it flips, strikes above the current price are ITM, strikes below are OTM. A quick way to remember it: a call is ITM when the underlying is above the strike, a put is ITM when the underlying is below the strike. Everything else is OTM, and the row nearest the current price is ATM.
Reading Open Interest to spot where big positions sit
Open Interest is the most useful column for a beginner to focus on early, because it tells you where large money has actually committed capital, not just where prices are quoted. Scan down the OI column on both the call and put side and look for strikes where OI is noticeably higher than the surrounding rows. These are the strikes where the most contracts are open.
A common way traders use this: a strike with unusually high call OI above the current price is often read as a resistance zone, the logic being that a large number of call writers have sold at that strike and may defend it. A strike with unusually high put OI below the current price is often read as a support zone, for the same reason on the put-writing side. This is a tendency traders watch for, not a guarantee, OI can build up and then get unwound as expiry approaches or as fresh views enter the market. Also watch the change in OI column alongside price movement, rising price with rising OI suggests fresh buying, rising price with falling OI can suggest short covering rather than genuine new demand.
Put-Call Ratio (PCR), a rough sentiment gauge
PCR is usually calculated as total put OI divided by total call OI, either for one strike, or more commonly, added up across all strikes for that expiry. Most chains show this number somewhere near the top or bottom of the page.
A PCR above 1 means there is more put OI than call OI outstanding, and this is commonly read as a bullish or oversold signal, since heavy put writing suggests traders expect the underlying to hold above that level. A PCR well below 1 means more call OI than put OI, commonly read as bearish or overbought. The honest caveat: PCR is a crowd-positioning indicator, not a forecast. It can stay elevated or depressed for extended stretches without the expected reversal showing up, so it works best as one input alongside price action and OI build-up, never as a standalone signal to trade on.
Max Pain, price gravitating toward least pain for writers
Max Pain theory looks at every strike and calculates what the total loss would be for option writers, sellers, if the underlying expired exactly at that strike. The strike where writers as a group would lose the least money is called the Max Pain strike. The theory claims that price tends to drift toward this strike as expiry approaches, since option writers as a group have more capital at stake and more incentive to influence price near expiry.
Treat Max Pain as a heuristic, not a rule. It is calculated purely from OI positioning, it says nothing about news, results, or broader market direction, and plenty of expiries settle well away from the Max Pain strike. It is worth glancing at in the last day or two before expiry, but it should never be the only reason for a trade.
Where Greeks fit into the chain
Many option chains let you add Greek columns per strike, most useful for a beginner are Delta and Theta. Delta tells you roughly how much the option's premium will move for a one-point move in the underlying, and it also roughly indicates the probability of the option expiring ITM, a Delta near 0.5 sits close to ATM, moving toward 1 or 0 as you go deeper ITM or further OTM. Theta tells you how much premium the option loses per day purely from time passing, holding everything else constant. As a beginner, the habit to build is simple: glance at Delta to gauge how sensitive a strike is to price movement, and glance at Theta to remember that every option you hold is losing some value every single day, regardless of direction.
A simple daily practice routine
Reading a chain well is a habit built through repetition, not something you absorb in one sitting. Before you ever place a trade based on an option chain, spend a few days just watching one.
- Pick one index, NIFTY or BANKNIFTY works well since liquidity is high and strikes are evenly spaced.
- Open the live option chain for the current week's expiry.
- Spend 5 minutes doing nothing but reading, do not place a trade or form a view yet.
- Note which strikes have the highest OI on the call side and the put side, and whether OI is building or unwinding compared to the previous day.
- Check the IV level and whether it is rising or falling through the day.
- Check the overall PCR and note whether it looks unusually high or low.
- Do this daily for at least one to two weeks before factoring any of it into an actual trade decision.
By the time you have done this for a couple of weeks, the chain stops looking like a wall of numbers and starts looking like a live map of where positions are concentrated. That is the real skill, everything else, including any trade you eventually place, builds on top of being able to read the chain calmly first.