How to read an option chain: OI, change in OI, volume and IV

An option chain looks crowded the first time you open it. It is really one table with a simple layout: calls on the left, puts on the right and strike prices in the middle.

The layout

Each row is one strike price. The left half shows the call option at that strike, and the right half shows the put option at the same strike. The strike closest to the current index level is called the at-the-money (ATM) strike.

• Call options with strikes below the index level are in the money (ITM). Above the index level they are out of the money (OTM).
• Put options are the opposite: strikes above the index level are in the money.

The columns, one by one

• LTP (last traded price): the price of the last trade in that contract. On an end-of-day chain, this is the price at the close of the session.
• Open interest (OI): the number of contracts that are still open, not yet closed or expired. Tradingraph shows OI in contracts (the NSE file reports quantity, so the tool divides by the lot size).
• Change in OI: how much open interest changed compared with the previous session. Rising OI means new positions are being added. Falling OI means positions are being closed.
• Volume: how many contracts traded during the session. Volume is a flow, while OI is a stock.
• Implied volatility (IV): the volatility that, put into an option pricing model, gives the option's price. Higher IV means the market is paying more for the option.

What traders look for

• The strikes with the highest call OI and the highest put OI. These are often watched as possible resistance and support, because many participants have positions there.
• Where the biggest change in OI happened on the day, which shows where new positions were added.
• Whether IV is higher on one side (calls or puts), called skew.

What the chain cannot tell you

Open interest has two sides for every contract: a buyer and a seller. The chain does not say which one is the large or professional side. Reading "put OI is high, so it is support" is a common shortcut, but writers of those puts can be wrong, and they may close their positions quickly.

About the data on Tradingraph

The chain here is built from NSE's end-of-day F&O file, which does not include implied volatility. Tradingraph works it out from each option's closing price using the Black-Scholes model with a 7% risk-free rate and no dividends. This is a simplification, so IV and Greeks here are estimates and can differ from your broker's figures. The page always shows the date of the data it uses.

This page is for information and education only and is not trading advice.