How to Place a Trade Using the Option Chain

4 min read | Updated on October 06, 2025, 17:03 IST

About Upstox

Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.

Are you someone with a high-risk appetite? Can you risk your invested capital for a higher return? Do you understand the risks of investing in the F&O segment? If the answer to all these questions is affirmative, you can start your investment journey in options. These investments provide some of the highest returns on investment and are quite popular among Indian retail traders.

However, trading in options can be challenging for new investors. One way to start your options investment journey is by using the option chain. An option chain is a tabular representation of all available option contracts for a particular stock or index. It displays critical data, including strike prices, premiums, open interest, and volumes, for both calls and puts across various expiration dates. It is an excellent tool for evaluating market sentiment, volatility, and potential price fluctuations.

Let us find out more about using the option chain:

Understanding Option Chain Structure

Before you start using the option chain for investment and putting trades, let's first take a look at its structure. It is broadly divided into two parts: Call Options at the left and Put Options at the right. They are separated by a column consisting of strike prices. Each row represents a specific strike price, and columns provide critical information for the trade.

Key columns in the table include:

Open Interest (OI)

Number of outstanding contracts

Change in OI

Indicates accumulation or unwinding of positions

Volume

Contracts traded during the day

Implied Volatility (IV)

The Market’s forecast of potential price movement

LTP (Last Traded Price)

Most recent premium traded

Bid/Ask Price

Current best buy/sell offer

Besides these columns, the table also consists of n-the-Money (ITM), At-the-Money (ATM), and Out-of-the-Money (OTM) options. These are important indicators for traders to evaluate and compare the current price levels with strike prices.

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Decoding Market Sentiment from the Option Chain

It is not straightforward to examine the table and understand market sentiments. However, you can conduct an analysis of Open Interest (OI) and Volume to gain valuable insights into the market's mood. A rising OI with increasing volume at a specific strike often indicates that traders are building positions, bullish for calls and bearish for puts.

High OI in Calls

Indicates a resistance zone, as many expect the price not to rise beyond that strike.

High OI in Puts

Suggests a support zone, reflecting confidence that the price won’t fall below that level.

You can also learn and utilise the Max Pain Theory (which is the strike price at which the option writer faces the least loss) to estimate the appropriate expiry price tendencies.

How to Use Option Chain to Place a Trade (Step-by-Step)

Here is a table explaining how you can use an option chain to place a trade:

Step	What to Do	Importance
Select Underlying Asset	Select a liquid stock or index, such as the Nifty, Bank Nifty, or Reliance.	High liquidity ensures tight bid-ask spreads and smooth trade execution.
Pick Expiry Date	Decide between weekly or monthly contracts based on your trade horizon.	Weekly = short-term setups; Monthly = positional strategies.
Identify Strike Price	Use the option chain to select ATM, OTM, or ITM strikes based on your view.	Reflects your price target, risk, and premium affordability.
Analyse OI, Volume & IV	Look for high OI + rising volume; check IV and bid-ask spread.	Signals active interest and better chances of entry/exit at fair prices.
Execute the Trade	Place a buy/sell order via your broker’s platform; choose limit or market.	Align your trade with market quotes and confirm execution type.

FAQs

What is the option chain, and how is it useful?

An option chain is a tabular listing of all call and put options for a stock or index, helping traders assess market sentiment, strike prices, and trading opportunities.

How do you decide which strike price to choose in the option chain?

Choose a strike price based on your market view, risk appetite, and proximity to the current market price (ATM/OTM/ITM).

How can open interest (OI) help in trading options?

High and rising OI indicates strong participation and can signal key support or resistance levels in the market.

Can I directly trade from the option chain?

Yes, most trading platforms allow you to select contracts and place buy/sell orders directly from the option chain interface.

Is it safe for beginners to trade using the option chain?

Yes, if used with proper analysis, limited risk exposure.

Mastering the option chain can give traders a significant edge in the derivatives market. It helps decode market sentiment, assess liquidity, and select the right strike and expiry based on data-driven signals. By understanding how to interpret open interest, volumes, premiums, and volatility, you can place more confident and informed trades. While the option chain is a powerful tool, it's most effective when used with proper risk management and practice. Start small, learn consistently, and use paper trading to sharpen your skills before going live.

About Author

Mariyam Sara

Sub-Editor

holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.