How to Read an Option Chain: A Step-by-Step Guide for Indian Traders

If you're new to options trading or want to sharpen your understanding, knowing how to read an option chain is essential. The option chain gives you a complete view of available contracts, strike prices, premiums, and market sentiment. This guide will walk you through the option chain used in the Indian stock market, especially on platforms like NSE India, helping you decode it with ease.

What is an Option Chain?

An option chain is a comprehensive listing of all the available call and put options for a particular stock, index, or ETF. It provides details like:

• Strike Price – The price at which you can buy (call) or sell (put) the underlying asset.

• Open Interest (OI) – Total number of outstanding contracts.

• Last Traded Price (LTP) – The most recent transaction price.

• Bid & Ask Price – Prices at which buyers and sellers are willing to trade.

• Volume – Number of contracts traded during the session.

Understanding these elements helps you track market trends and build informed trading strategies.

Step 1 – Choose the Right Underlying Asset

Start by selecting the stock or index you wish to trade. In India, popular underlying assets include Nifty 50, Bank Nifty, Reliance, and Tata Motors. Ensure you are checking the option chain on a reliable platform like the NSE India website or a trading platform like AlphaBots that integrates real-time data.

Step 2 – Identify the Expiry Date

Options have a fixed lifespan and expire on specific dates. Most index options in India expire every Thursday, while stock options have different expiration cycles. Choose the expiry that aligns with your trade horizon.

Step 3 – Understand Call and Put Sections

Option chains are divided into two parts:

1. Call Options (CE) – Rights to buy the asset.

2. Put Options (PE) – Rights to sell the asset.

Each section provides separate metrics, helping you analyze bullish or bearish market sentiment.

Step 4 – Learn to Read Key Metrics

•  Strike Price

Check where the stock currently trades. Strike prices close to the spot price are “at the money,” whereas higher or lower strike prices are “out of the money” or “in the money.”

• Open Interest (OI)

Rising OI indicates increasing market participation and can help confirm trends.

• Change in OI

A sudden increase or decrease in OI can hint at building or unwinding positions.

• Volume

High volume near certain strike prices may suggest significant interest.

• Implied Volatility (IV)

A measure of expected future volatility. Higher IV usually means higher premiums.

Step 5 – How to Use the Option Chain in Strategy Building

• Spot support and resistance levels based on where most open interest is concentrated.

• Compare call and put open interest to gauge market sentiment.

• Use short straddle and long straddle strategies to trade volatility.

• Refer to technical indicators like RSI and moving averages to time your entries.

Step 6 – Avoid Common Mistakes

• Don’t rely only on LTP or volume—always cross-check with OI and implied volatility.

• Avoid trading far out-of-the-money options unless you understand the risk.

• Never ignore expiry timelines when planning trades.

Bonus: Tools to Check Option Chains in India

• NSE India Website – Official, reliable source.

• Brokerage Platforms – Like Zerodha, Upstox, or Angel One.

• Algo Trading Platforms – Use platforms like AlphaBots to integrate option data into automated strategies.

Conclusion

Reading an option chain may seem overwhelming at first, but once you understand the key metrics like strike prices, open interest, and implied volatility, it becomes a powerful tool to strategize your trades. Whether you’re a beginner or an experienced trader, mastering the option chain can give you the edge you need in the Indian derivatives market.

Start practicing by analyzing real-time option chains on platforms like AlphaBots, and build your confidence before taking live trades.