Option chain analysis: how to read open interest, PCR and Max Pain

What positioning data on an option chain actually measures, how traders read it, and the limits every one of these numbers carries.

By the EzyOptions Team · Updated 2026-10-07

The layout, once

An option chain shows one underlying and one expiry. Strikes run down the middle; calls sit on one side and puts on the other. Indian chains label calls CE and puts PE, so NIFTY 24000 CE is the 24,000 call. Each row carries the premium, the volume traded, the implied volatility and the open interest for that strike. The row nearest the current price is the at-the-money strike, and strikes are shaded by whether they are in the money. If premium and moneyness are new to you, the basics guide covers them first.

How to read an option chain, step by step

1. Pick the underlying and the expiry. One chain is one index and one expiry; the weekly and the monthly are different chains.
2. Find the at-the-money strike, the one nearest the current index level. Calls below it and puts above it are in the money.
3. Read across each row: the call's premium, IV and open interest on one side, the put's on the other.
4. Find the heaviest open interest. Large call OI above the index and large put OI below it show where positions are concentrated.
5. Check the change in OI to see where positions are being added or closed today.
6. Read PCR and Max Pain as context. Both summarise the whole chain; neither predicts the next move.

What is open interest (OI)?

Open interest (OI) is the number of contracts at a strike that have been opened and not yet closed. It is not the same as volume. Volume counts every trade today, including trades that open and close positions within the hour; OI counts what is still standing at the end. A strike can trade heavily and see its OI barely move.

Traders read large OI as interest the market has committed to. A strike with heavy call OI above the current price is often described as resistance, and heavy put OI below it as support, on the reasoning that option sellers, who usually hold the larger positions, will defend those levels. It is a useful map of where positions are concentrated. It is not a wall: price moves through heavy OI strikes regularly, and the positions there are then adjusted or closed.

What is change in OI?

The change in open interest is how many contracts were opened (positive) or closed (negative) at a strike during the session. The total says where positions sit; the change says where they are being added or removed today. Read beside the price of the same contract, it sorts the day into four patterns that Indian market data labels by name. These are interpretations, not facts: the chain records that contracts were opened, never who opened them or why.

The trap on an option strike: "price" means that option's premium, not the index. A call whose premium falls while its open interest rises is short buildup in that call, which traders call call writing.

What is the put-call ratio (PCR)?

The put-call ratio (PCR) is total put open interest divided by total call open interest for one expiry: PCR = total put OI ÷ total call OI. A PCR above 1 means more puts are open than calls; below 1, the reverse. Some screens show a volume PCR instead, the same division on contracts traded today, so check which one you are reading. In the five-strike chain in the Max Pain section below, puts carry 18,000 contracts and calls 21,000, so PCR = 18,000 ÷ 21,000 = 0.86.

Commentary often quotes 0.7 and 1.3 as extremes. Those are habits of the trade, not thresholds the exchange or any model defines. The honest use of PCR is as context. A reading that moves sharply from its own recent range says positioning changed, which is worth knowing. A single PCR number on its own says very little about where the index goes next. The put-call ratio guide works through volume and near-the-money PCR and how the ratio moves during a session.

What is Max Pain?

Max Pain is the strike at which the total value of all open options, calls and puts together, would be lowest if the index expired there. It is the expiry price that would cost option buyers the most in aggregate and option writers the least. The theory attached to it is that the index tends to drift toward Max Pain into expiry.

How it is calculated:

1. Take each strike in turn as the expiry level.
2. For every call strike below that level, multiply the gap by the call open interest; for every put strike above it, multiply the gap by the put open interest.
3. Add everything up: that is what all open options would be worth at that level.
4. The strike with the smallest total is Max Pain.

The total is smallest at 24,000, so that is this chain's Max Pain. Treat the theory with care. Max Pain is a calculation on today's open interest, and open interest changes through the session, so the strike moves too. Some expiries do settle near it; many do not. It is a reference point for where the option book is balanced, not a forecast. The Max Pain guide lays out the full calculation and shows how one afternoon of new positions moves the strike.

Putting it together without fooling yourself

Read positioning data as a description of the present: where contracts are concentrated, where they are being added, how the book is balanced. Pair it with what the Greeks say about how the premiums you care about will respond. And when a pattern seems convincing, test it: the Session Analysis replays recorded sessions, so you can watch how the chain looked on days the index ran straight through a supposed wall.

The option chain in EzyOptions draws OI as depth bars per strike and computes PCR and Max Pain across the whole chain as it updates, so these numbers are visible without working them out by hand.

Option chain analysis: common questions

Educational content only: not investment advice. You are responsible for your own trading decisions.