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An option chain is a structured chart that displays all available call and put option contracts for a particular security, showing details such as strike prices, expiry dates, premiums, volume, and open interest. At first glance, an option chain may appear complex due to the large amount of numerical data presented side by side. However, each column plays a specific role in explaining how the market is pricing future expectations of the underlying asset.
As of 2026, reading the option chain also requires an understanding of SEBI’s revised lot sizes and restricted weekly expiry schedules, which have changed the liquidity profile of many popular indices. By learning how to read an option chain, traders can assess market sentiment and evaluate potential price movements more effectively.
Key Takeaways
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The option chain displays all call and put contracts for a security, by strike price and expiry date.
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Open interest and volume indicate trader interest at various strikes.
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Bid-ask data reflects current liquidity and price.
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Reading an option chain provides insight into market mood and prospective price levels.
What Is an Option Chain?
An option chain has two sections: call and put. A call option is a contract that gives you the right but not the obligation to buy the underlying at a specified price and within the Option's expiration date. A put option is a contract that gives you the right but not the obligation to sell the underlying at a specified price and within the Option's expiration date. An option's strike price is additionally listed, which is the stock price at which the investor buys the stock if the option is exercised.
An option chain lists all available option contracts, both puts and calls, for a given security. Option chains are widely used for intraday and near-expiry analysis. Traders typically focus on 'last price,' 'net change,' 'bid,' and 'ask' columns to assess current market conditions.
Usage of Option Chain
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Understanding market sentiment: The option chain offers valuable insight into market sentiment for a specific underlying asset. Traders can analyse the number of open interests at different strike prices to understand whether the traders are bullish, bearish, or neutral.
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Identifying support and resistance: The option chain data helps traders identify potential support and resistance levels. High open interest at a particular strike price may act as a support or resistance level, indicating the levels where significant buying and selling pressures exist.
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Evaluating implied volatility: The option chain can give traders an idea about the implied volatility of an asset at a particular strike price. Implied volatility refers to market participants' expectations regarding asset price changes.
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Make informed trading strategy: Traders can use the values of the option chain to create different options trading strategies. By analysing the number of open interests at different strike prices and premiums, they can construct strategies that align with their overall trading strategy and risk tolerance level.
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Risk management and hedging: Using an option chain, traders can assess the potential risk associated with their existing open positions. The option chain helps traders analyse the options Greeks and form effective hedging techniques.
Importance of the Option Chain
Understanding an option chain unlocks several advantages for traders:
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Spotting In the Money and Out of the Money options: Quickly see which options are currently profitable (ITM) and which are not (OTM) based on the underlying asset's price.
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Gauging liquidity by strike price: Assess the trading activity for different strike prices, helping you choose options with sufficient liquidity.
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Finding option premiums: Easily identify the cost (premium) of options based on their strike price and expiration date.
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Identifying potential price swings: The option chain can signal potential breakouts or sharp movements in the underlying asset's price.
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Macro vs. micro insights: Index option chains offer broader market sentiment, while stock option chains provide specific details about a particular company.
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Understanding complex strategies: Analyse the potential profitability of straddle and strangle option strategies across various strike prices.
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Making informed decisions: By considering all this information, traders can align their investment strategies with the current market climate.
In short, the option chain equips both options traders and traditional stock market traders with valuable tools for informed decision-making.
Also Read: What is an ITM Call Option?
How to Read the Options Chart?
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Metric |
Meaning |
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Options Type |
There are two types of options: Call and Put. |
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Price at which the option can be exercised. Call options become profitable when the underlying price exceeds the strike price, while puts gain when it falls below the strike |
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Open Interest (OI) |
Total outstanding contracts not yet closed |
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Volume |
Contracts traded during the day |
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Implied Volatility (IV) |
Expected future volatility priced into options |
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LTP |
Last traded option price |
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Net Change |
Difference in LTP from the previous close |
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Bid |
The highest price buyers are willing to pay |
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Ask |
Lowest price sellers are willing to accept |
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Bid Qty/Ask Qty |
Number of contracts at best bid/ask |
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In-The-Money |
Call Option: Strike price < underlying price Put Option: Strike price > underlying price |
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At-The-Money |
Call Option: Strike price = underlying price Put Option: Strike price = underlying price |
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Out-of-the-money (OTM) |
Call Option: Strike price > underlying price Put Option: Strike price < underlying price |
Significance of NSE Option Chain
Here are some key benefits of referring to the NSE option chain:
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It offers a clear view of in the-money (ITM) and out-of-the-money (OTM) options, helping traders quickly identify contracts with intrinsic value.
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It is useful for assessing the depth and liquidity at different strike prices by analysing open interest and volume.
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It helps traders identify option premiums for specific strike prices and expiry dates, supporting informed contract selection.
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The option chain can act as an early signal of potential breakouts or sharp index movements when there is unusual build-up in open interest.
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Unlike stock option chains, index option chains provide broader, macro-level market indications, while stock chains reflect company-specific sentiment.
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It offers better visibility into strategies such as straddles and strangles across multiple strike prices, helping traders align positions with market sentiment.
Overall, the NSE option chain serves as a practical analysis tool for both options traders and cash market participants by improving market understanding and decision-making.
The Relationship Of The Underlying Option To The Strike Price
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Put |
Call |
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In-the money option |
The strike price of the Option is higher than the price of the underlying |
The strike price of the Option is less than the underlying the |
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Out of the money Option |
The price of the underlying is greater than the strike price of the Option |
The price of the underlying is less than the strike price of the Option |
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At the money option |
The price of the underlying is equal to the strike price of the Option |
The price of the underlying is equal to the strike price of the Option |
Difference Between Put and Call Options
The following are some of the differences between call option and put option.
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Feature |
Call Option |
Put Option |
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Right |
Right to buy an underlying asset |
Right to sell an underlying asset |
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Profit Potential |
Unlimited |
Limited to the difference between the strike price and the underlying asset price at expiration, minus the option premium |
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Loss Potential |
Limited to the option premium paid |
Limited to the option premium paid |
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Market Expectation |
Bullish (expecting price to increase) |
Bearish (expecting price to decrease) |
Also Read: What is Call Option and Put Option?
Conclusion
An options chain chart summarises all key option data in one place, making it easier to understand how calls and puts are priced across strike prices and expiry dates. By reading an option chain carefully, traders can assess market sentiment, liquidity, and potential price levels without relying only on price charts.
It helps in comparing premiums, tracking open interest, and identifying areas of strong participation. A clear understanding of ‘what is option chain’ and how it works supports better decision-making, improves risk management, and allows traders to align their strategies with prevailing market conditions.
