{"id":2227,"date":"2026-09-24T07:24:29","date_gmt":"2026-09-24T07:24:29","guid":{"rendered":"https:\/\/entri.app\/explore\/?post_type=curriculum&p=2227"},"modified":"2026-09-24T07:24:29","modified_gmt":"2026-09-24T07:24:29","slug":"types-of-options-and-option-chain-analysis","status":"publish","type":"curriculum","link":"https:\/\/entri.app\/explore\/stock-market\/types-of-options-and-option-chain-analysis\/","title":{"rendered":"Types of Options and Option Chain Analysis"},"content":{"rendered":"

Options are popular derivative instruments among Indian traders, especially on indices like Nifty and Bank Nifty. This tutorial explains the basic types of options and how to read an option chain to make informed trading decisions.<\/p>\n

What Is an Option?<\/strong><\/h2>\n

An option is a contract that gives the buyer the right, but not the obligation<\/strong>, to buy or sell an underlying asset (like a stock or index) at a fixed price before or on a specific date. The seller (writer) of the option is obligated to fulfil the contract if the buyer exercises it.<\/p>\n

Types of Options<\/strong><\/h2>\n

There are two basic types of options:<\/p>\n\n\n\n\n\n
Type <\/td>\nMeaning <\/td>\nBuyer’s Right <\/td>\n<\/tr>\n
Call Option<\/strong><\/td>\nGives the right to buy<\/strong> the asset <\/td>\nProfits when price rises <\/td>\n<\/tr>\n
Put Option <\/strong><\/td>\nGives the right to sell<\/strong> the asset <\/td>\nProfits when price falls<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Based on Moneyness<\/strong><\/h3>\n

Options are also classified based on the relationship between the strike price and the current market price:<\/p>\n

    \n
  • In the Money (ITM):<\/strong> Has intrinsic value if exercised now<\/li>\n
  • At the Money (ATM):<\/strong> Strike price is equal (or very close) to the current market price<\/li>\n
  • Out of the Money (OTM):<\/strong> Has no intrinsic value; only time value<\/li>\n<\/ul>\n

    Based on Style<\/strong><\/h3>\n
      \n
    • European Options:<\/strong> Can be exercised only on the expiry date (used for Indian index options)<\/li>\n
    • American Options:<\/strong> Can be exercised any time before expiry (used for Indian stock options)<\/li>\n<\/ul>\n

      Key Option Terms to Know<\/strong><\/h2>\n\n\n\n\n\n\n\n\n
      Term <\/strong><\/td>\nMeaning <\/strong><\/td>\n<\/tr>\n
      Strike Price <\/td>\nFixed price at which the asset can be bought\/sold <\/td>\n<\/tr>\n
      Premium <\/td>\nPrice paid by the buyer to the seller<\/td>\n<\/tr>\n
      Expiry Date<\/td>\nDate on which the contract ends<\/td>\n<\/tr>\n
      Lot Size<\/td>\nMinimum quantity that can be traded<\/td>\n<\/tr>\n
      Open Interest (OI)<\/td>\nTotal number of outstanding contracts<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      What Is an Option Chain?<\/strong><\/h2>\n

      An option chain is a table that lists all available call and put options for a particular stock or index, across different strike prices and expiry dates, at one place. It helps traders compare prices, activity, and sentiment across strikes instantly.<\/p>\n

      How to Read an Option Chain<\/strong><\/h2>\n

      A typical option chain is divided into two halves — Calls<\/strong> on the left and Puts<\/strong> on the right — with strike prices in the middle.<\/p>\n\n\n\n\n\n\n\n\n\n
      Column<\/strong><\/td>\nWhat It Shows<\/strong><\/td>\n<\/tr>\n
      OI (Open Interest) <\/strong><\/td>\nNumber of active contracts at that strike<\/td>\n<\/tr>\n
      Change in OI<\/strong><\/td>\nRise or fall in OI compared to the previous session<\/td>\n<\/tr>\n
      Volume<\/strong><\/td>\nNumber of contracts traded during the day<\/td>\n<\/tr>\n
      IV (Implied Volatility)<\/strong><\/td>\nMarket’s expectation of future price swings<\/td>\n<\/tr>\n
      LTP (Last Traded Price)<\/strong><\/td>\nMost recent premium paid for that option<\/td>\n<\/tr>\n
      Bid\/Ask Price<\/strong><\/td>\nBuyer’s and seller’s quoted prices<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

      Why Option Chain Analysis Matters<\/strong><\/h2>\n

      Option chain analysis helps traders gauge market sentiment before taking a position. Here’s what to look for:<\/p>\n

        \n
      • High Call OI<\/strong> at a strike often signals a resistance level<\/li>\n
      • High Put OI<\/strong> at a strike often signals a support level<\/li>\n
      • Rising IV<\/strong> suggests increasing uncertainty or expected volatility<\/li>\n
      • PCR (Put-Call Ratio)<\/strong>, calculated by dividing total put OI by total call OI, indicates overall market mood — a PCR above 1 is generally considered bullish, while below 1 is considered bearish<\/li>\n<\/ul>\n

        Quick Tips for Beginners<\/strong><\/h2>\n
          \n
        • Always check OI along with price movement, not price alone<\/li>\n
        • Focus on ATM and near-ATM strikes for the most reliable signals<\/li>\n
        • Compare current data with the previous day’s chain to spot fresh build-ups<\/li>\n
        • Avoid deep OTM options with very low OI, as they can be hard to exit<\/li>\n<\/ul>\n

          Conclusion<\/strong><\/h2>\n

          Understanding the types of options — calls, puts, and their moneyness — lays the foundation for reading market data correctly. When used in combination with regular option chain analysis, this knowledge helps traders identify support and resistance levels and gauge sentiment. This also aids in making more informed entry and exit decisions in the derivatives market.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Options are popular derivative instruments among Indian traders, especially on indices like Nifty and Bank Nifty. This tutorial explains the basic types of options and how to read an option chain to make informed trading decisions. What Is an Option? An option is a contract that gives the buyer the right, but not the obligation, […]<\/p>\n","protected":false},"author":14,"featured_media":0,"template":"","meta":{"_acf_changed":false},"curriculum-category":[111,112,145],"custom_linking_tags":[],"class_list":["post-2227","curriculum","type-curriculum","status-publish","hentry","curriculum-category-stock-market","curriculum-category-stock-market-tutorials","curriculum-category-futures-and-options-trading"],"acf":[],"yoast_head":"\nTypes of Options and Option Chain Analysis - Entri Free Materials<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/entri.app\/explore\/stock-market\/types-of-options-and-option-chain-analysis\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Types of Options and Option Chain Analysis - Entri Free Materials\" \/>\n<meta property=\"og:description\" content=\"Options are popular derivative instruments among Indian traders, especially on indices like Nifty and Bank Nifty. 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