Option Chain Analysis — Complete Guide
How to Read NSE Option Chain for Nifty & Bank Nifty Trading
1. What is an Option Chain?
An option chain is a listing of all available option contracts for a given underlying (Nifty or
Bank Nifty) showing all call and put options across different strike prices and expiry dates.
It is available free on the NSE website ([Link]) and is one of the most powerful
tools for understanding market sentiment.
2. How to Read the Option Chain
Column Meaning How to Use
OI (Open Interest) Total open contracts at that strike High OI = strong support/resistance
Change in OI OI added or removed today Rising OI = new positions being built
Volume Contracts traded today High volume confirms activity at that strike
IV (Implied Vol.) Expected future volatility High IV = expensive options
LTP Last traded price of option Current option premium
Strike Price The center column ATM is closest to current market price
Bid/Ask Buying and selling price Tight spread = liquid option
3. Key Option Chain Signals
Signal 1 — Call Writing (Bearish Signal):
When OI in Call options increases significantly at a particular strike, it means option writers
(smart money) are selling calls expecting the market to stay below that level. This acts as
a strong resistance.
Signal 2 — Put Writing (Bullish Signal):
When OI in Put options increases significantly at a particular strike, it means option writers
are selling puts expecting the market to stay above that level. This acts as strong support.
Signal 3 — Call Unwinding (Bullish Signal):
When existing Call OI decreases (writers are covering/exiting), the resistance at that level
is weakening. Market may break above that level.
Signal 4 — Put Unwinding (Bearish Signal):
When existing Put OI decreases, the support at that level is weakening. Market may break
below that level.
4. PCR — Put Call Ratio
PCR = Total Put OI / Total Call OI. It is a contrarian indicator.
PCR Value Interpretation Trading Bias
Below 0.7 Extreme bearish sentiment (too many call buyers)
Contrarian BUY signal — market may rise
0.7 to 1.0 Slight bearish sentiment Mild bullish bias
1.0 Neutral — balanced sentiment No clear bias
1.0 to 1.3 Slight bullish sentiment Mild bearish bias
Above 1.3 Extreme bullish sentiment (too many put buyers)
Contrarian SELL signal — market may fall
5. Step-by-Step Option Chain Reading Process
Step 1: Open NSE website → Go to Option Chain → Select Nifty or Bank Nifty
Step 2: Note the ATM strike (closest to current market price)
Step 3: Find the strike with highest Call OI — this is your resistance for the day
Step 4: Find the strike with highest Put OI — this is your support for the day
Step 5: Calculate PCR = Total Put OI / Total Call OI
Step 6: Check Change in OI — identify where new positions are being added
Step 7: Look for OI unwinding — identify weakening support or resistance
Step 8: Combine with CPR and pivot points for high-confidence trades
6. Common Option Chain Mistakes
• Looking at only one expiry — always check near-week expiry for intraday
• Ignoring Change in OI — static OI is less useful than changing OI
• Treating OI as a fixed support/resistance — OI levels shift during the day
• Not combining OI data with price action — use both together
• Reacting to small OI changes — only significant changes (10%+) matter