Decoding the Option Chain

Look at the centre row. It holds two separate contracts: NIFTY expiry E 25,000 CE, and NIFTY expiry E 25,000 PE. CE means a European Call and PE means a European Put. European means exercise happens only at expiry. You can still sell the option before then. NSE index options settle in cash, so no shares arrive in your demat account. Options on individual stocks are settled by delivery.

The price columns answer different questions. LTP, the last traded price, is the premium of the latest completed trade. The bid is the highest price a buyer currently shows. The ask is the lowest price a seller currently shows. The quantities beside them are orders waiting at those prices. In our snapshot the LTP is seven minutes older than the quotes, so it tells you about the past, not about what you can trade now.

Some screens also show price change or OHLC. OHLC is the open, high, low and close of the option premium, not of the index. A change column compares the premium with a stated reference, and during the session the close field may still hold yesterday’s close. Read the field notes before you rely on any of these.

Open interest (OI) is the number of contracts still outstanding in that exact series. Volume is the number of contracts traded during the session. Change in OI compares today’s OI with a reference; here the reference is yesterday’s closing OI. Do not mix up a change in OI with a change in premium. Implied volatility (IV) is a volatility figure worked backwards from an option price. A later chapter shows exactly how.

Keep the units apart. In this table, bid and ask quantities are units, while OI and volume are contracts. So 130 displayed units are two lots of 65. And 100 outstanding contracts are 6,500 units. Check the units on a real screen before you convert anything. Any total from five rows describes only those five rows, not the whole NIFTY chain.

Now compare intrinsic value with the premium. Our model gives the 24,800 Call a premium of ₹375.23. Subtract the ₹200 intrinsic value and ₹175.23 is left. That extra amount pays for the seven days still to run, in which NIFTY can move. The 25,000 Call has zero intrinsic value, yet its model premium is ₹260.60. An option with no intrinsic value before expiry is not worthless.

Where do these premiums come from? We priced each strike with the European Black–Scholes–Merton model. The inputs are 7/365 of a year, a 6% interest rate, a 1% dividend yield and 18% volatility. We then placed an invented bid ₹2 below the model price and an invented ask ₹2 above it. These are teaching inputs. They are not NSE’s own calculation and not a price anyone paid.

The leftover amount, premium minus intrinsic value, is usually called time value. Use it with care. It only makes sense when the premium and the index come from the same moment. An old LTP set beside today’s index gives a misleading answer. Also, a European Put can legitimately trade below its intrinsic value, because the strike is paid only at expiry. A negative leftover is not proof of a risk-free trade.

Moneyness does not rank contracts. An ATM option is not automatically the cheapest, the most liquid or the best fit for your plan. A lower premium is not better value by itself. Blue marks a Call and beige marks a Put, and nothing more. Whether a position gains depends on whether you bought or sold, the price you paid or received, and any other legs you hold.

The ledger is a separate exercise on one Call series, not a rebuild of the five rows above. Start with yesterday’s closing OI of 1,000 contracts and volume of zero. Four events trade 100, 60, 40 and 20 contracts, so volume ends at 220. OI ends at 1,060, a change of +60 from the prior close. We assume nothing else touches the count: no expiry, no exercise, no correction.

Look at the third event. Both sides close 40 contracts. Volume goes from 160 to 200, while OI falls from 1,100 to 1,060. The last event adds 20 to volume and changes nothing in OI. So a change of +60 does not mean only 60 contracts traded. It also does not mean buyers beat sellers by 60. Closing a position does not need your original counterparty either.

The reference point matters. After the third event, the change from the prior close is still +60, but the change from the event before is −40. Keep daily change and interval change apart, and never add daily changes from different snapshots. Brokers and websites also update at their own pace. Write down the source, the time and the baseline.

OI and volume do not tell you why people traded. High Call OI does not prove that professionals sold those Calls. High Put OI does not prove support. Those contracts may be hedges, parts of spreads or single bets, and the chain cannot separate them. Large activity also does not guarantee a tight spread or enough depth for your order. The next chapter takes the practical step: which price and quantity can you actually trade?

At the 25,000 strike, the model Call midpoint is about ₹260.60 and the Put midpoint is about ₹236.65. The premiums differ, yet both come from the same 18%. The interest and dividend inputs create that gap. Work backwards from the bid, midpoint and ask and you get about 17.8550%, 18.0000% and 18.1450%, for both the Call and the Put. So one IV cell always needs a stated price behind it. The midpoint is a calculation, not a promised fill.

On a real screen, a Call and a Put at the same strike can show different IVs. That usually reflects different price choices, timestamps or spreads. It is not, by itself, a sign of fear about a fall. Skew is a different comparison, across strikes. For one expiry, compare an out-of-the-money Put at a lower strike with an out-of-the-money Call at a higher strike, at a similar distance from the index. Our flat 18% example shows no skew, and even a real skew does not predict direction.

Providers differ. NSE's option-chain page, checked on 8 October 2026, describes its IV as a reference calculation that uses a 10% interest rate and refreshes at fixed intervals from the LTP and the index value. It does not state the interval. That is NSE's website convention. It is not our 6% teaching input, and not the current risk-free rate. Read another provider's notes before you assume it works the same way.

Sometimes there is no IV to show, because a price is missing or the inputs do not fit. Do not force a number, and never replace it with 0%. Remember too that an old LTP set against today's index gives a misleading premium-minus-intrinsic figure, and a European Put can trade below its intrinsic value. A high IV alone does not prove mispricing, guarantee movement or make selling options safe income.

Blank fields need an explanation, not an invented zero. A missing ask is not a free option. A missing or zero bid does not mean the option is worth nothing. Record the quote as unavailable and check the contract, the trading status and the feed. With no last-trade time, you cannot tell how old the LTP is.

If a snapshot shows the bid above the ask, set that pair aside and check the contract, timestamps and feed. This crossed quote is a warning about the data, not a trading chance. A bid equal to the ask is a locked quote, which is a different case. A market order has no price limit of your own. Do not assume your broker will accept it, or that it fills at the best ask for the whole quantity.

A journal makes a later comparison checkable. Keep the provider, underlying, expiry, contract, units and filters the same each time, and keep both timestamps. Compare like with like. A premium move and an index move are different things, and a daily OI change is not an interval change. Write down what you expect and over what period. Come back later and record what really happened, and what else could explain it.

Our five strikes are a cropped window for one expiry. A total from them describes only that window, and its largest OI may not be the largest in the full chain. It cannot give you a full-market put-call ratio, a real max pain figure, or the history needed for IV Rank. Lesson 22 reads price together with OI. Lesson 23 introduces the put-call ratio (PCR), and lesson 24 explains max pain. Each adds assumptions to the raw chain, so keep the contract, scope and clocks with the evidence.