How to read an option chain in India

The layout: calls on the left, puts on the right

The option chain reads like a tug-of-war scoreboard. Strike prices run down the centre column in ascending order. To the left are call options, to the right are puts. The row where the strike is closest to the current spot price is the at-the-money (ATM) row, often highlighted in a different colour by the platform. Strikes below the spot are in-the-money for calls and out-of-the-money for puts. Strikes above the spot are out-of-the-money for calls and in-the-money for puts.

For each strike on each side the chain shows the last traded price (LTP) or premium, the bid-ask spread, the open interest, the change in open interest since yesterday, the volume for the session, and on most platforms the implied volatility (IV). The premium is what you pay or receive for the option. Open interest is how many matched contracts remain open. Change in OI shows the net change in that outstanding inventory, not which participant initiated or closed a trade.

Finding concentrations without inventing identities

Traders often monitor the strikes with the highest put and call OI as possible reaction zones because a large amount of matched inventory is concentrated there. The chain does not say that sellers created that concentration, that they are defending it, or that the level must become support or resistance. Confirm any level on the price and liquidity tape.

A rise in call or put OI means more matched contracts remain open; a fall means fewer remain open. Public aggregate OI does not expose aggressor, opening-versus-closing legs, counterparty, covered-versus-naked status, or linked spreads. Reading the chain is a daily inventory audit, not a one-number directional signal.

The implied volatility column

Each strike also carries its own implied volatility reading. For a given expiry the IV tends to be a curve (called the volatility smile or skew) rather than a flat line. Out-of-the-money put strikes on indices often carry higher IV than ATM strikes, reflecting the extra demand for downside protection. A sudden spike in IV across the chain, especially on one side, signals that the market is pricing a bigger move than usual and option premiums are inflating.

Before a major event such as an RBI policy, a quarterly result or a Budget, implied volatility can be elevated relative to its earlier range. It may fall quickly once uncertainty resolves, but that does not automatically make buying or writing profitable. The outcome depends on the entry premium, underlying move, volatility path, time decay, linked legs, hedges and costs.

FAQ5 reader questions · AEO-eligible

Common questions on reading the option chain.

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