This article is educational. Options trading involves substantial risk; Scoutstack provides research only and does not execute trades.
What is an option chain?
An option chain is a table of all available strike prices for an underlying (like Nifty), showing Call (CE) options on one side and Put (PE) options on the other. For each strike you’ll typically see the last price, change, volume, implied volatility (IV) and open interest (OI).
- Calls (CE) — bets that price will rise.
- Puts (PE) — bets that price will fall.
- Strike price — the level at which the option can be exercised.
- The at-the-money (ATM) strike sits closest to the current price.
What is open interest (OI)?
Open interest is the total number of option contracts currently open (not yet closed or expired) at a given strike. It tells you where positions are concentrated.
- Rising OI + rising price → new buyers, trend may continue.
- Rising OI + falling price → new sellers/shorts, pressure building.
- Falling OI → positions being closed (unwinding).
Think of OI as “how many people are committed at this level”. Big OI = a level the market cares about.
Finding support and resistance from OI
- High Call (CE) OI at a strike → resistance. Many call writers expect price to stay below it. Example: heavy CE OI at Nifty 23,000 suggests 23,000 may act as resistance.
- High Put (PE) OI at a strike → support. Many put writers expect price to stay above it. Example: heavy PE OI at 22,500 suggests support near 22,500.
So the strikes with the highest CE and PE OI roughly bracket the range the market is pricing in for the session or expiry.
The Put-Call Ratio (PCR)
PCR = total Put OI ÷ total Call OI. It’s a quick sentiment gauge:
- PCR > 1 → more puts than calls; often read as bullish (lots of put writing = support below).
- PCR < 1 → more calls than puts; often read as bearish/cautious.
- Extreme readings can signal over-stretched sentiment (possible reversal).
PCR is a context tool, not a standalone buy/sell signal.
OI build-up: the 4 combinations
| Price | OI | Reading |
|---|---|---|
| Up | Up | Long build-up (bullish) |
| Down | Up | Short build-up (bearish) |
| Up | Down | Short covering (bullish, shorts exiting) |
| Down | Down | Long unwinding (bearish, longs exiting) |
Reading these helps you understand why a move is happening, not just that it happened.
How to use it (sensibly)
- Note the highest CE OI (resistance) and highest PE OI (support).
- Check whether OI is building or unwinding at those strikes through the day.
- Use PCR for overall sentiment context.
- Combine with price action and IV — never trade on OI alone.
OI is a probability tool, not a guarantee. Levels shift intraday, especially on expiry. Always trade with a defined stop-loss.