Options & F&O · Module 21

    Decoding the Option Chain

    Every column on the NSE option chain, and the order an experienced eye actually reads them in.

    Rohit Singh
    Rohit SinghMr. Chartist
    June 7, 2026
    13 min read
    Lesson
    21
    Intermediate level
    Reading time
    13 min
    6 chapters
    Practice
    6
    quiz questions and 7 FAQs

    Think of the rate board outside a grain shop. One list, many items, and a price against each. You can see at a glance what is cheap, what is dear and what is selling fast.

    An option chain is the same kind of board for options. It is a table for one index or stock and one expiry date. Each row is a strike price. Calls sit on the left, puts on the right.

    The chain shows more than prices. It also shows how many contracts are open at each strike, how many traded today, and how much movement each price already expects. These numbers tell you where trading is crowded. They do not tell you where the market is going.

    This lesson reads one chain slowly, column by column, with illustrative NIFTY numbers. It ends with a short list of what a chain cannot tell you, because that is where most beginners go wrong.

    Chain basics

    What is on an option chain?

    A strike price is the fixed level written into an option contract. A call gains value when the index goes above its strike. A put gains value when the index goes below its strike.

    The chain lists one row for each strike. The strike is in the middle. The call figures are on its left and the put figures on its right.

    Each side has the same columns, mirrored. The table below says what each column shows and how to read it.

    Illustration, not advice

    One option chain, read left to right

    Calls on the left, puts on the right, strikes in the middle. Numbers are illustrative.

    Illustrative NIFTY option chain with open interest, change in open interest, volume, implied volatility and last traded price for calls and putsFive strikes from 24,400 to 24,600 with the index at 24,520. Call columns on the left, put columns on the right. In the money cells are shaded. The highest call open interest is at 24,600 and the highest put open interest is at 24,400, both ringed.CALLSPUTSSTRIKEOICHNGIN OIVOLUMEIVLTPLTPIVVOLUMECHNGIN OIOI82,350+12,4503,24,60013.8168.4024,40028.4013.610,42,300+98,4002,86,70096,780+18,9004,10,27513.4132.7524,45042.7513.37,18,600+52,1001,63,9002,14,600+64,2009,86,40013.198.2524,50058.2513.18,94,050+71,3002,45,1501,42,300+38,7006,12,15013.071.6024,55081.6013.04,26,700−14,2001,08,4003,08,450+1,12,60011,24,80012.949.8524,600109.8513.22,84,150−6,80074,250NIFTY now 24,520In the moneyHighest open interest in this viewGreen LTP: call · Red LTP: put

    Swipe sideways to see the whole chain.

    What this does not tell you: High open interest at a strike shows that many contracts are open there. It does not show who holds them, why, or whether the level will hold. Every open contract has a buyer and a seller.
    An illustrative NIFTY chain with the index at 24,520. Shaded cells are in the money. Ringed cells hold the highest open interest.

    • OI (open interest)

      What it shows

      Contracts still open at this strike

      Read it as

      Where positions are crowded

    • Chng in OI

      What it shows

      How much OI changed since the previous close

      Read it as

      Whether positions grew or shrank today

    • Volume

      What it shows

      Contracts traded today

      Read it as

      How active the strike was today

    • IV (implied volatility)

      What it shows

      Movement the price already expects

      Read it as

      How dear the option is

    • LTP (last traded price)

      What it shows

      Price of the most recent trade

      Read it as

      A guide. It may be old

    • Bid and ask

      What it shows

      Best price a buyer offers and a seller wants

      Read it as

      The prices you can actually deal at

    Every column appears on both the call side and the put side of the chain.

    Key points

    • One row is one strike. Calls on the left, puts on the right.
    • OI, volume and IV describe the market. They do not predict it.

    In one line

    An option chain is a price board for options. It shows prices and positions. It does not show direction.

    ITM, ATM, OTM

    In the money, at the money, out of the money

    First find where the index trades now. The strike nearest to it is called at the money (ATM).

    A call with a strike below the index is in the money (ITM). It already has value if used today. A put with a strike above the index is ITM in the same way. Options on the other side are out of the money (OTM).

    The price of an option is its premium. Part of it is intrinsic value, the amount by which the option is ITM. The rest is time value, the price of the chance that it may become more valuable before expiry.

    Take the 24,500 call with the index at 24,520. Its intrinsic value is 24,520 − 24,500 = ₹20. It trades at ₹98.25. So its time value is 98.25 − 20 = ₹78.25. Like an insurance premium, the time value is used up as expiry nears.

    Premium

    Premium = Intrinsic value + Time value

    Intrinsic value is never negative. If the option is not ITM, its intrinsic value is zero and the whole premium is time value.

    • Call intrinsicIndex − Strike, or zero if that is negative
    • Put intrinsicStrike − Index, or zero if that is negative
    • Time valuePremium − Intrinsic value
    StrikeStatusIntrinsicLTPTime value
    24,400ITM₹120.00₹168.40₹48.40
    24,450ITM₹70.00₹132.75₹62.75
    24,500ATM (nearest)₹20.00₹98.25₹78.25
    24,550OTM₹0.00₹71.60₹71.60
    24,600OTM₹0.00₹49.85₹49.85

    Illustrative NIFTY call prices with the index at 24,520. Time value = LTP − intrinsic value. It is largest near the ATM strike and smaller on both sides.

    In one line

    Every premium has two parts: intrinsic value, which you can calculate, and time value, which is the rest.

    Professional tip

    Work out the intrinsic value yourself before you buy. For an OTM option the whole price is time value, and that goes to zero at expiry if the index does not move your way.

    Volume and OI

    Volume and open interest: what is the difference?

    Volume starts from zero every day and only goes up. Each trade adds to it.

    Open interest (OI) carries forward from day to day. It goes up when a new buyer and a new seller both open positions. It stays the same when one side opens and the other closes. It goes down when both sides close.

    The ledger below follows four trades of 100 contracts at one strike. Volume ends at 400, but nothing is left open.

    Illustration, not advice

    Same strike, four trades: volume only rises, OI moves up and down

    Each trade is 100 contracts. Watch the two running totals.

    Four trades on one option strike showing volume rising to 400 while open interest goes 100, 100, 100 and then 0Trade one: both sides open, volume 100 and open interest 100. Trade two: one side closes and one opens, volume 200, open interest stays 100. Trade three: same, volume 300, open interest 100. Trade four: both sides close, volume 400 and open interest falls to zero.TradeVolume so farOI so farWhat happened to OI1A buys 100 from B.Both are new.100100OI +100: both open2A sells 100 to C.A closes, C is new.200100OI same: one in, one out3B buys 100 from D.B closes, D is new.300100OI same: one in, one out4C sells 100 to D.Both close.4000OI −100: both closeEnd of the day: volume 400, open interest 0.A busy strike can leave nothing open. That is why you read both numbers.

    Swipe sideways to see the whole ledger.

    What this does not tell you: This is a toy ledger with named traders. A real chain shows only the totals, so you cannot tell from it which of these four things happened.
    Four trades at one strike. Volume only rises. OI rises, stays or falls depending on who opens and who closes.

    • What it counts

      Volume

      Contracts traded today

      Open interest

      Contracts still open

    • Resets each day?

      Volume

      Yes, starts from zero

      Open interest

      No, it carries forward

    • Can it fall?

      Volume

      No, it only rises through the day

      Open interest

      Yes, when positions close

    • What it cannot tell you

      Volume

      Who bought and who sold

      Open interest

      Who bought, who sold, and why

    Volume compared with open interest.

    Key points

    • Use volume to see where trading happened today.
    • Use OI to see where positions are still standing.
    • Neither one is a signal of direction on its own.

    In one line

    Volume counts trades made today. Open interest counts contracts still open.

    Warning

    Every open contract has a buyer and a seller. A strike with large call OI has as many call buyers as call sellers. The chain does not say which side is “strong”.

    Implied volatility

    What does implied volatility tell you?

    Implied volatility (IV) is the amount of movement that an option’s price already expects. It is worked out backward from the price.

    Before a big event, such as election results, IV usually rises and options become dearer. Umbrellas get dearer just before the monsoon in the same way. After the event, IV usually falls. Prices can then drop even if the index moved in your favour.

    IV differs from strike to strike. Puts far below the index often show higher IV than calls at the same distance above it. This pattern is called skew. It shows how much buyers are paying for protection. It is not an error.

    A high IV can be followed by a calm market, and a low IV by a sudden jump. When you buy an option in a high-IV period, you pay more for the same chance. When you sell one, you collect more but carry the same risk of a large move.

    Key points

    • IV tells you how dear an option is, not where the index will go.
    • IV usually rises before events and falls after them.
    • Skew is normal. It is not a signal by itself.

    In one line

    IV is the price of movement. It is not a forecast of movement.

    Bid and ask

    LTP, bid and ask: which price can you trade at?

    The last traded price (LTP) is the price of the most recent trade. In an option that few people trade, that trade may be minutes old.

    The bid is the best price a buyer is offering. The ask is the best price a seller wants. If you buy right now you pay the ask. If you sell right now you receive the bid.

    The gap between them is the spread. It is a cost you pay on every trade. In a busy strike it is small. In a thin strike it can be large.

    ItemPriceWhat it means
    LTP₹98.25Last trade. May be old
    Bid₹98.10You sell here
    Ask₹98.35You buy here
    Spread₹0.25₹0.25 × 65 = ₹16.25 per lot if you buy and sell straight away

    Illustrative prices for the 24,500 call. The lot size of 65 is assumed. Confirm the current lot size on the NSE website. Brokerage and taxes are extra.

    In one line

    LTP is the price of the last trade. You deal at the bid or the ask.

    Professional tip

    Check the bid and the ask before you place an order, and prefer strikes where the gap is small.

    Reading order

    A simple order for reading any chain

    A fixed order stops you from jumping to the biggest number and calling it a level. Follow the five steps below on any chain.

    How to read an option chain, in order

    Four questions to ask of any chain before you look at a single number.

    How to read an option chain, in orderFind the spot level, read calls on the left and puts on the right, check open interest and volume, then check last traded price and implied volatility.1Find the spotNote where the index trades.The strike closest to it is"at the money" (ATM).2Read the two sidesCalls on the left, puts onthe right, strikes in themiddle of the table.3Check OI and volumeOI: contracts still open.Volume: contracts tradedtoday. They are different.4Check price and IVLTP: last traded price.IV: how much movementthat price already assumes.5Compare strikesDoes a strike carry muchmore OI than its neighbours?Is its price in line?6Note the limitsOI does not say who is thebuyer or the seller, and itcannot predict direction.It helps whenYou see where trading is crowded andwhat each option currently costs.It goes wrong whenYou call one high-OI strike a "wall"and trade as if it must hold.The chain is a map of positions and prices. It is not a forecast.
    A reading order for any chain, ending with what it cannot tell you.

    Step by step

    1. 01

      Find the spot

      Note where the index trades. The strike nearest to it is the ATM strike.

    2. 02

      Pick a side

      Calls are on the left, puts on the right. Do not mix them when you compare numbers.

    3. 03

      Read the price

      Check LTP against the bid and the ask. The last trade may be old.

    4. 04

      Read OI and volume

      OI shows open positions. Chng in OI shows whether they grew or shrank today. Volume shows today’s activity.

    5. 05

      Note the limits

      A large number does not say who is buying or selling, or why.

    In one line

    Read the chain in the same order every time. Finish with what it cannot tell you.

    Warning

    Do not treat the strike with the highest OI as a wall the index cannot cross. Positions can be closed or rolled at any time, and a strong move can pass straight through.

    Warning

    Chain figures can lag or differ between data sources. Check the official NSE data for exact figures.

    FAQ

    Common questions

    ATM (at the money) is the strike nearest to the index. A call is ITM (in the money) when its strike is below the index, and a put is ITM when its strike is above the index. Options on the other side are OTM (out of the money) and have only time value.

    Knowledge Check

    Question 1 of 6Score: 0

    The index is 24,520 and the 24,500 call trades at ₹98.25. What is its time value?

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    Rohit Singh — Mr. Chartist

    Written By

    Rohit Singh

    Mr. Chartist

    With 14+ years of experience in Indian financial markets, Rohit Singh (Mr. Chartist) is a SEBI Registered Research Analyst, Amazon #1 bestselling author, and the founder of Investology — a premium trading ecosystem trusted by a 1.5 Lakh+ strong community across India.

    INH000015297Full Bio