How to Read Option Chain, OI, PCR & IV Easy Guide for New Traders

Why Every Trader Must Learn Option Chain Analysis

If you want to succeed in stock market trading in India, especially in index futures and options, you must learn how to read the option chain, understand Open Interest (OI), interpret the Put-Call Ratio (PCR), and track Implied Volatility (IV).

At Stockfyre Academy, one of the best stock market institutes in Lucknow, we teach traders and investors step-by-step how to decode these tools to make better trading decisions. Whether you’re searching for stock market courses in Lucknow, top 10 stock market training institutes in Lucknow, or simply the best stock market institute near me, this guide will give you a solid start.

Quick basics first

• An option = right to buy (Call) or sell (Put) the index at a fixed strike price by an expiry date.
• Lot size 75 means 1 option contract = 75 × option premium (points).
• Buyers pay premium (limited loss = premium). Sellers receive premium but can face large losses (risky).

1) Option Chain — what to look at (easy)

Open the option chain. For each strike you’ll see columns like:

• CE / PE Premium = price per unit (in points).
• OI (Open Interest) = number of open contracts at that strike.
• Change in OI = how much OI changed today (shows new activity).
• Volume = contracts traded today.
• IV = implied volatility for that strike.

How to read: find ATM (at-the-money) strike near 25,000. Compare premiums, OI and IV across strikes.

2) PCR (Put-Call Ratio) — simple meaning

• PCR = Total Put OI ÷ Total Call OI (can be by OI or by volume).
• If PCR > 1 → more puts than calls (more protective/bearish interest).
• If PCR < 1 → more calls than puts (more bullish interest).
  Use PCR as a mood indicator, not a rule. A high PCR can mean the market expects support, or fear — read with price trend.

Example: If Nifty has PE OI = 20 lakh and CE OI = 15 lakh,

PCR = 20 ÷ 15 = 1.33 → market has more put positions → indicates support building.

3) OI and Change in OI — why they matter

• OI shows where traders have placed positions (big OI = many contracts).
• Increase in OI + price moving up on calls → fresh bullish positions.
• Increase in OI + price moving down on puts → fresh bearish positions.
• Decrease in OI often means traders are closing positions (profit booking or cutting losses).

Short rule: look for strikes with very high OI — those strikes often act as magnets (support/resistance).

4) IV (Implied Volatility) — plain words

• IV = how expensive options are because of expected future moves.
• High IV → premiums high → buying is more expensive; selling benefits if IV falls.
• Low IV → premiums cheap → easier/cheaper to buy options.

Tip: Don’t buy options when IV is extremely high unless you expect a big move.

Avoid buying options when IV is very high unless you expect a strong directional move.

5) Strike — simple terms

• Strike price = the price where the option can be exercised (e.g., 25,000).
• ITM (in-the-money): Call strike below index or Put strike above index.
• ATM (at-the-money): strike ≈ index (closest).
• OTM (out-of-the-money): Call strike above index, Put strike below index.

Beginners: start with ATM or near-OTM for directional trades.

6) IVIX (India VIX / volatility index) — explained

• IVIX is the market’s expectation of volatility for the near term.
• High IVIX → market expects big moves; low IVIX → calm expected.
• Use IVIX to judge whether options are expensive overall.

7) Find major support & resistance using OI — step-by-step

1. Open the option chain.
2. Look at PE OI column — find the strike(s) with the largest PE OI. Big PE OI = likely support area.
3. Look at CE OI column — strike(s) with the largest CE OI are likely resistance.
4. Check Change in OI: if OI at a strike is increasing, that level is gaining importance.
5. Confirm with price: if price repeatedly stalls near that strike, the OI-backed level is working.

Simple example:

• If 24500 PE OI = 200,000 (big) → strong support around 24,500.
• If 25500 CE OI = 220,000 (big) → strong resistance around 25,500.

Extra important points for beginner options traders

• Lot size math: always convert premium to ₹/₹ value by multiplying with lot size.
• Time decay (Theta): options lose value as expiry nears. Buyers lose value with time if price doesn’t move.
• Start with limited-risk trades: buy calls/puts or use bull/bear spreads. Avoid naked selling.
• Greeks basics: Delta (how option price moves with index), Theta (time decay), Vega (sensitivity to IV). Learn them slowly.
• Choose expiry carefully: nearer expiry = faster time decay, farther expiry = costlier premium.
• Risk management: size positions small, use stop-loss, never risk more than you can afford to lose.
• Avoid trading before big news (earnings, economic data, budget) — options move wildly.
• Demo/paper trade first and keep a trade journal.

Short, worked example (Nifty = 25,000, lot = 75) — assume numbers

Assumptions (example only):
25,000 CE premium = 120 points.
25,000 PE premium = 110 points.

Buy 1 lot of 25,000 CE at premium 120:

• Cost = premium × lot size.
  Calculate: 120 × 75 = 120 × (70 + 5) = (120×70) + (120×5) = 8,400 + 600 = 9,000.
  So you pay 9,000 rupee-equivalent for 1 lot.
• Break-even at expiry = strike + premium = 25,000 + 120 = 25,120.
  (If at expiry Nifty = 25,120 → you break even ignoring transaction costs.)

If Nifty moves to 25,200 at expiry:

• Intrinsic value = 25,200 − 25,000 = 200 points.
• Profit per unit = intrinsic − premium = 200 − 120 = 80 points.
• Total profit = 80 × 75 = 80 × (70 + 5) = (80×70) + (80×5) = 5,600 + 400 = 6,000.
• Return = profit / cost = 6,000 ÷ 9,000 = 0.666… ≈ 66.7%.

If Nifty ≤ 25,000 at expiry:

• The call expires worthless → loss = premium paid = 9,000.

Quick checklist before placing a trade

• Trend clear? (trade with trend)
• Check relevant OI levels for support/resistance.
• Check PCR and IV/IVIX.
• Decide entry, stop-loss, target and lot size.
• Know expiry and fees/margin.
• Use a trade journal.

FAQs: Option Chain, OI, PCR & IV

• Can beginners learn option chain easily?
  Yes. With the right guidance, beginners can understand option chain within a few sessions.
• How important is PCR in trading?
  PCR is a sentiment indicator. It’s not 100% accurate but works well when combined with OI and price action.
• Can IV tell me the market direction?
  No, IV only shows expected volatility, not direction.
• Which is the best way to practice option chain analysis?
  Start with Nifty option chain on NSE website daily, note OI levels, and track how the market respects them.
• Where can I learn complete option trading in Lucknow?
  At Stockfyre Academy, we provide both classroom and online training for beginners and advanced traders.

Conclusion – Master Options with Stockfyre: Learning how to read Option Chain, OI, PCR, and IV can be the difference between random trading and becoming a consistent trader. With expert guidance at Stockfyre Academy, you can transform your trading journey from guessing to structured analysis.

Why Learn These at Stockfyre Academy?

At Stockfyre, we simplify complex trading concepts for beginner and experienced traders. Our offline and online stock market training programs in Lucknow cover:

• Option Chain reading step by step.
• Advanced OI analysis with real-time examples.
• How to combine PCR, OI, and IV for better intraday trading.
• Proven intraday and options strategies with risk management.

That’s why Stockfyre ranks among the top 10 stock market training institutes in Lucknow, trusted by hundreds of traders across India.