Reading an Option Chain: OI, IV and Max Pain Explained
Open interest, implied volatility and max pain look intimidating on the NSE option chain. Decode what each column is actually telling you before your next F&O trade.
The option chain is a positioning map
Every row on the Nifty or Bank Nifty option chain is a record of where traders have placed bets. Read it as a map of supply and demand, not a crystal ball.
Open Interest (OI)
OI is the number of contracts still open at a strike. Rising OI with rising price signals fresh longs; rising OI with falling price signals fresh shorts. Heavy call OI above spot acts as resistance; heavy put OI below acts as support.
Implied Volatility (IV)
IV is the market's expectation of future movement, baked into the option price. High IV means expensive options — good for sellers, costly for buyers. IV usually spikes before events and collapses after, the move known as IV crush.
Max Pain
Max pain is the strike where the largest number of options expire worthless, inflicting maximum loss on buyers. Price often drifts toward it near expiry, but treat it as context, not a guarantee — in trending markets it fails.
Putting it together
Use OI for support and resistance, IV to judge whether you should be a buyer or a seller, and max pain only as a soft magnet near expiry. No single column is a signal on its own.
Disclaimer: This article is for educational purposes only and is not investment advice or a recommendation to buy or sell any security. Investments in securities are subject to market risk; read all related documents carefully. RootNivesh is a SEBI Registered Research Analyst (Reg. No. INH000XXXXX).