How to read an options chain: a beginner's guide with a NIFTY example

What an options chain is

An options chain is a table of every option available on one underlying, such as NIFTY, for one expiry date. Each row is a strike price. The left half of the table shows call options at that strike, the right half shows put options, and the strike sits in the middle.

If you're new to options, two definitions are all you need to start:

• A call option gains value when the underlying rises above its strike price.
• A put option gains value when the underlying falls below its strike price.

A real-looking chain, explained

Here is a small slice of a NIFTY chain with the index at 22,451.85. Premiums are per unit. Real chains show many more strikes and columns, but these are the ones that matter most.

Call in the moneyPut in the moneyAt the money (closest strike to spot)

The numbers in this table are illustrative, rounded for teaching. Live premiums change every second.

Reading it column by column

Strike price (the middle column)

The price at which the option lets you buy (call) or sell (put) the index. NIFTY strikes are 50 points apart; most liquid trading happens at the 100-point strikes near the current price.

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

This describes where a strike sits relative to the current price, and it's the first thing to check in any row.

• At the money (ATM): the strike closest to the current price. Here, 22,500.
• In the money (ITM): a call with a strike below the current price, or a put with a strike above it. These already have real value built in.
• Out of the money (OTM): a call above the current price or a put below it. These are pure bets on a future move and cost less.

Notice that the shading swaps sides: the 22,300 call is in the money while the 22,300 put is out of the money.

Premium (LTP)

The price of the option per unit, often labelled LTP (last traded price). Every premium is made of two parts:

• Intrinsic value, what the option would be worth if it expired right now. The 22,500 put is worth 22,500 − 22,451.85 = ₹48.15 at expiry today.
• Time value, everything above that, which you pay for the chance of a bigger move. For that put: ₹162.20 − ₹48.15 = ₹114.05 of time value. Out-of-the-money options are all time value.

Time value shrinks every day and disappears completely at expiry. That's why buying options and waiting is harder than it looks.

Implied volatility (IV)

IV is the market's estimate of how much the index will swing, expressed as a yearly percentage. Higher IV means more expensive options for every strike. IV usually rises before big events such as election results or a budget, and falls after them, which can shrink premiums even if the index moves the way you expected.

Open interest (OI) and change in OI

Exchange chains like the one on the NSE website also show open interest: the number of contracts still open at each strike. A strike with very high call OI is often watched as possible resistance, and very high put OI as possible support, because many option sellers have positions there. "Change in OI" shows whether those positions were added or closed today.

The Greeks, without the maths

Greeks describe how a premium reacts to change. You only need two to start, and both are easier to understand in rupees per lot.

Delta: how much the premium moves with NIFTY

The 22,500 call has a delta of 0.43, so it gains about ₹0.43 per unit for every 1-point rise in NIFTY. Put deltas are negative because puts gain when NIFTY falls. Delta also works as a rough probability: a 0.43 delta call has around a 43% chance of finishing in the money.

Theta: how much value is lost each day

Theta is the daily time decay. A theta of −13.9 means the option loses roughly ₹13.90 per unit per day if nothing else changes, and decay speeds up as expiry gets close.

What that means for one lot

One NIFTY lot is 65 units, so multiply everything by 65:

Put those last two lines side by side and the core challenge of buying options is obvious: NIFTY needs to move about 32 points in your favour every day just to cover the decay.

Gamma and vega

Gamma measures how fast delta itself changes; it's highest for at-the-money options near expiry, which is why those can swing wildly. Vega measures how much the premium changes for a 1-point change in IV. Come back to these once delta and theta feel natural.

Two numbers traders pull from the whole chain

Put-call ratio (PCR)

Total put open interest divided by total call open interest. Traders read a PCR well below 1 as more call activity and well above 1 as more put activity, but its meaning depends on context, and it's best used alongside price action rather than on its own.

Max pain

The strike at which option buyers as a group would lose the most at expiry. Some traders watch it on expiry day. It's a description of where positions sit, not a forecast.

A one-minute routine for reading any chain

1. Find the at-the-money strike, the one closest to the current price.
2. Check the expiry date. Fewer days left means faster time decay.
3. Look at IV. Is it high or low compared with recent days?
4. Pick a strike and read its delta and theta, then multiply both by the lot size.
5. Decide your stop-loss on the premium before you buy, not after.

This guide is for education only. It isn't investment advice or a recommendation to buy or sell any security. Options trading carries a high risk of loss. Winbannu is a practice platform and doesn't execute real trades.