How to Read an Option Chain: Open Interest, IV, PCR and Max Pain, with a Real NIFTY Example
The option chain is the most-watched screen in Indian markets and one of the most misread. We take a real NIFTY chain from October 2026 and explain each column, the popular indicators built from it, and their limits.
By Pradeep RawalNISM-certified (Series XV & VIII) · Updated · 6 min read
Key takeaways
- An option chain lists every strike for one expiry, with calls on one side and puts on the other: premium (LTP), open interest (OI), change in OI, volume and implied volatility (IV).
- Open interest is the number of contracts still open. A rise means new positions; it does not tell you whether buyers or sellers started them.
- Implied volatility is the market's price of uncertainty. Strikes below the spot usually carry higher IV than strikes above it, a pattern called skew.
- The put-call ratio (PCR) and "max pain" are summaries of OI. They describe positioning; they are weak predictors of where the index will go.
- Large OI at a strike often acts as a reference level for traders, but it can shift within a single session.
Open NSE's website or any trading app during market hours and the option chain is one click away: a dense table of numbers for every strike price. Traders quote it constantly: "huge call writing at 23,000", "PCR is above one", "max pain is 22,650". This guide explains what each part of the chain means, using a real snapshot, and separates what the numbers can tell you from what they cannot.
The example: NIFTY on 5 Oct 2026
Below is the NIFTY option chain at the close of 5 Oct 2026 for the weekly expiry of 13 Oct 2026 (8 calendar days away), built from NSE's end-of-day data. The NIFTY closed at 22,555.75. We show strikes in steps of 100 points around the money; the full chain has many more.
| Call OI (lakh) | OI change | Call IV % | Call LTP | Strike | Put LTP | Put IV % | OI change | Put OI (lakh) |
|---|---|---|---|---|---|---|---|---|
| 0.7 | +0.3 | 16.3 | 527.65 | 22,100 | 56.95 | 16.3 | +10.1 | 13.4 |
| 2.7 | +1.4 | 15.9 | 445.65 | 22,200 | 73.05 | 15.8 | +11.3 | 17.1 |
| 2.7 | +0.4 | 15.5 | 367.80 | 22,300 | 96.65 | 15.4 | +6.0 | 12.0 |
| 6.9 | +1.9 | 15.1 | 296.90 | 22,400 | 125.60 | 15.1 | +4.0 | 15.9 |
| 13.8 | +4.4 | 14.6 | 232.10 | 22,500 | 161.90 | 14.7 | +10.3 | 19.2 |
| 19.8 | +12.9 | 14.3 | 176.70 | 22,600 (ATM) | 205.25 | 14.3 | +11.5 | 16.8 |
| 24.0 | +1.6 | 14.0 | 130.05 | 22,700 | 259.95 | 14.2 | −1.2 | 14.6 |
| 22.1 | +0.7 | 13.8 | 92.90 | 22,800 | 320.40 | 13.8 | +1.5 | 8.6 |
| 18.5 | +9.8 | 13.7 | 64.20 | 22,900 | 387.75 | 13.2 | +0.9 | 2.9 |
| 39.6 | +10.7 | 13.6 | 43.40 | 23,000 | 466.60 | 13.1 | +4.3 | 9.8 |
| 17.1 | +5.8 | 13.6 | 28.65 | 23,100 | 552.00 | 13.0 | +0.3 | 1.6 |
The columns, one by one
Strike price
The middle column. Calls on the left give the right to buy NIFTY at that level; puts on the right give the right to sell. The strike closest to the current index, 22,600 here, is at the money (ATM). Calls below the spot and puts above it are in the money; the rest are out of the money.
LTP: the premium
The last traded price, in index points. One lot costs the premium multiplied by the lot size: the 22,600 call at 176.70 points costs about ₹11,486 per lot. The ATM call plus the ATM put (the straddle) cost 382.0 points, about 1.69% of the index: the market's rough estimate of how far NIFTY might move by expiry.
Open interest (OI)
The number of option contracts that are open and not yet closed or expired. When a new buyer and a new seller trade, OI rises; when an existing buyer sells to an existing seller who is closing, OI falls. OI is a measure of positions, not of direction: every open contract has one buyer and one seller.
Change in OI
How much OI rose or fell since the previous day. On 5 Oct 2026, call OI rose sharply at 23,000 and at strikes just above the spot, while put OI rose at strikes below it. A common reading is that sellers were writing calls above the market and puts below it, expecting NIFTY to stay in a range. That reading is plausible, but the data cannot prove who initiated the trades.
Implied volatility (IV)
The volatility that, put into an option-pricing model, gives the observed premium. It is the market's price of uncertainty. The ATM IV here was about 14.5%. Notice in the chart below that IV is higher at lower strikes than at higher ones. This skew is normal in equity markets: investors pay more for protection against falls (puts below the market) than for exposure to rallies.
Indicators built from the chain
Highest OI strikes
Across the whole chain for this expiry, the largest call OI was at 23,000 (39.6 lakh units) and the largest put OI at 21,500 (33.3 lakh units). Traders often treat these as resistance and support. They are reference points where many positions sit, and option sellers may defend them, but they move: large OI can be built or unwound within hours.
Put-call ratio (PCR)
Total put OI divided by total call OI for the expiry: 371.1 lakh ÷ 487.1 lakh = 0.76. A PCR below 1 means more call than put positions are open. Interpretations differ, and some read the same number as bullish and others as bearish. Treat it as a description of positioning, not a forecast.
Max pain
The expiry level at which option buyers as a group would lose the most, equivalently where the total payout to all option holders is smallest. Here it was 22,650, close to the spot of 22,556. Some traders believe the index gravitates towards max pain at expiry. Evidence for that is weak; max pain itself moves every day as OI changes.
What the option chain cannot tell you
- Who is on which side. OI shows contracts, not whether the buyer or the seller started them, or whether they are hedges against portfolios.
- The future. Positioning changes quickly, and large players can hold positions in futures, stocks or other expiries that the chain does not show.
- Intraday dynamics from end-of-day data. Our snapshot is a closing picture; during the day, OI and IV can swing widely.
Use the chain to understand the price of what you are trading: how expensive options are (IV), how much movement the market expects (ATM straddle), and where liquidity is (OI and volume). Decide your trade, its size and its exit before you look at PCR or max pain, and remember that most individual F&O traders lose money, according to SEBI's studies.
The bottom line
The option chain is a map of prices and positions. Learn to read premiums, OI, change in OI and IV, and you will understand what the market is charging and where traders are positioned. Treat PCR, max pain and "OI support and resistance" as descriptions rather than predictions, and size any trade so that being wrong is affordable.
Frequently asked questions
Why do OI numbers look so large?
Exchanges usually publish open interest in units (number of shares or index units), not contracts. Divide by the lot size to get contracts. In our example, NIFTY options had a lot size of 65.
What is the difference between volume and open interest?
Volume counts contracts traded during the day; open interest counts contracts still open at the end of it. A contract opened and closed the same day adds to volume but not to OI.
Does a high PCR mean the market will rise?
Not reliably. Some traders read a high PCR (more puts than calls open) as bullish because put writers are confident, others as bearish because hedging is heavy. Studies of such sentiment indicators show weak and unstable predictive power.
Why does ATM IV matter?
ATM implied volatility sets the price of options near the current level, so it tells you how expensive options are. Option buyers profit from a rise in IV and sellers from a fall, apart from the price move itself.
Sources and further reading
About the author
Pradeep Rawal is an NISM-certified market professional (Series XV Research Analyst and Series VIII Equity Derivatives) with more than 15 years in personal finance and stock market education. He founded Financial Nirvana, wrote the book From Cubicles to Wealth Creation, teaches money and investing workshops, builds quantitative tools and backtesting systems, and writes about personal finance with the working shown.
This article is for education only and is not investment, tax or legal advice. Tax rules quoted are for the tax year 2026-27 (FY 2026-27) unless stated, and can change; check the latest position with the Income Tax Department or a qualified professional before acting. Examples use assumed returns that are not guaranteed.
