Reading the option chain: OI, PCR, max pain and buildup
What open interest shows, how to read PCR and max pain, and how to classify long and short buildup from price and OI.
1. The option chain layout
An option chain lists every strike for one expiry, with calls on the left, puts on the right and strikes in the middle. For each contract you see open interest, change in OI, volume, IV, last traded price and change.
ITM cells are usually shaded: calls below spot and puts above spot. The ATM strike sits closest to the current index level.
2. Open interest vs volume
- Volume counts contracts traded today. It resets every session.
- Open interest (OI) counts contracts still open. It rises when new positions are created and falls when positions are closed.
Large call OI at a strike often means many traders have written (sold) calls there, so the strike can act as resistance. Large put OI often acts as support for the same reason. These are tendencies, not walls: they shift when price moves decisively.
Watch change in OI during the day. Fresh writing at a strike tells you more about today's positioning than OI carried over from last week.
3. Put-call ratio (PCR)
PCR = total put OI ÷ total call OI for an expiry.
| PCR | Common reading |
|---|---|
| Above about 1.2 | Heavy put writing; traders comfortable that support will hold |
| 0.7 to 1.2 | Balanced |
| Below about 0.7 | Heavy call writing; traders expect resistance to hold |
Extreme PCR readings are sometimes read the other way (contrarian): when everyone has written puts, a fall can force them to cover quickly. Watch how PCR changes through the day rather than one snapshot.
4. Max pain
Max pain is the strike at which the total value of all open options would be lowest at expiry: the point where option buyers as a group would lose the most.
Some traders expect the index to drift towards max pain near expiry. The evidence is mixed; treat it as one reference level, most relevant in the last day or two before expiry and when the market is quiet.
5. Buildup: combining price and OI
| Price | OI | Classification | What it suggests |
|---|---|---|---|
| Up | Up | Long buildup | New buyers entering |
| Down | Up | Short buildup | New sellers entering |
| Up | Down | Short covering | Sellers exiting, pushing price up |
| Down | Down | Long unwinding | Buyers exiting, pushing price down |
The same logic works for futures and for individual option contracts. For options, remember that the buyer and the writer of a contract hold opposite views, so always ask which side is more likely driving the change.
Key takeaways
- OI shows open positions; volume shows today's trading. Change in OI shows fresh positioning.
- Heavy call OI tends to act as resistance and heavy put OI as support, until price moves decisively.
- PCR and max pain are context, not signals on their own.
- Price direction plus OI direction classifies buildup: long, short, covering, unwinding.
Try it on ExpertView: Open the live Nifty option chain with buildup and max pain →
From ExpertView's free courses at expertview.in/learn. For study and educational use. Not investment advice. Rules, lot sizes, taxes and timings change; check the latest from NSE, MCX, SEBI and the Income Tax Department.