Every Indian retail F&O trader has the option chain open in one tab. Most of them don't know what to look at first.
The option chain for Nifty or BankNifty displays every available strike across the current expiry — along with price, open interest, volume, and bid-ask data for both calls and puts. Reading it is not complicated once you know what each column is telling you.
What the Option Chain Shows
Each row is one strike price. For that strike, you see:
- LTP (Last Traded Price) — the most recent premium paid for that option
- OI (Open Interest) — the total number of outstanding contracts not yet settled
- Change in OI — net contracts added or closed since the previous close
- Volume — contracts traded in today's session
- IV (Implied Volatility) — the market's expectation of future volatility embedded in that premium
- Bid/Ask — the current buy and sell prices
Calls are on the left. Puts are on the right. The spot price (current Nifty or BankNifty level) sits in the middle column. Strikes above spot are OTM for calls and ITM for puts. Strikes below spot are ITM for calls and OTM for puts.
Reading OI Buildup to Find Support and Resistance
Open interest accumulation tells you where large participants — institutions, proprietary desks — are writing options. This matters because options writers tend to defend their positions near expiry.
High call OI at a strike = resistance zone. If there is large OI in the 24,000 CE (call), writers of that option benefit when Nifty stays below 24,000 at expiry. They will typically hedge and sell above that level, creating selling pressure.
High put OI at a strike = support zone. Large OI in the 23,500 PE means those writers benefit when Nifty stays above 23,500. They will typically support price near that level near expiry.
The strike with the highest combined OI (call + put) is called the max pain level — the theoretical price where option buyers collectively lose the most. Index expiry prices frequently gravitate towards max pain in the final hours of expiry Thursday.
Reading OI Changes
Change in OI is more useful than raw OI for understanding fresh money flow:
| Price ↑ | OI ↑ | New longs being added — bullish |
|---|---|---|
| Price ↓ | OI ↑ | New shorts being added — bearish |
| Price ↑ | OI ↓ | Short positions being covered — weakening rally |
| Price ↓ | OI ↓ | Longs exiting — weakening fall |
If Nifty is rallying but Call OI is increasing sharply, ask yourself: are buyers chasing premiums up, or are writers adding shorts at the high? OI context answers that.
Put-Call Ratio from the Chain
The Put-Call Ratio (PCR) is total put OI divided by total call OI. You can calculate it directly from the option chain.
- PCR above 1.2 means significantly more puts are open than calls — the market is heavily positioned for a fall. Contrarians read this as bearish exhaustion (too many people already short).
- PCR below 0.7 means calls dominate — market is heavily positioned for a rise. Contrarians read this as bullish exhaustion.
PCR is a sentiment indicator, not a trigger. It tells you where positioning is crowded, not when it will reverse.
Implied Volatility Across Strikes
IV is not the same across strikes. In Indian markets, lower strikes (deep OTM puts) typically carry higher IV than OTM calls — this is the volatility skew. It reflects demand for downside protection.
Near expiry, IV across all strikes collapses rapidly — this is IV crush. Buying options the day before a major event (budget, RBI policy) means paying inflated IV, which then collapses after the event regardless of the direction of movement. Many retail traders lose money on directionally correct trades simply because IV crush erased their premium faster than the underlying moved.
A Practical Order for Reading the Chain
- Identify the highest OI call strike and the highest OI put strike. These are your range boundaries for the expiry.
- Calculate or look up the PCR to understand crowd positioning.
- Check change in OI at strikes closest to spot price to see where fresh money is entering.
- Check IV at near-the-money strikes to understand how expensive current premiums are relative to normal.
- If you are considering a trade, check the bid-ask spread. Wide spreads on illiquid strikes mean you are paying a significant cost on entry and exit.
What the Chain Cannot Tell You
The option chain is a snapshot of current positioning. It does not tell you what positions will be added or removed tomorrow. It does not tell you the direction of the market. Institutional strategies are complex enough that a single OI number at one strike can be a hedge, a spread leg, or a directional bet — and you cannot always distinguish between them.
Use the chain to understand where concentration exists and where the crowded trades are. Do not use it to predict exact price levels with certainty.
For educational purposes only. Profitma is not a SEBI-registered investment adviser or research analyst. Nothing in this article constitutes investment advice.