Intermediate · 8 min read

Reading the option chain: OI, PCR and max pain

What each column means, how open interest is read, and the limits of these indicators.

The option chain lists calls on one side and puts on the other, with strikes in the middle. Each row shows prices, volume, open interest and Greeks for one strike.

Open interest (OI)

Open interest is the number of contracts that are still open (not yet closed or expired). Volume counts trades in a day; OI counts positions outstanding. Rising OI means new positions are being added; falling OI means positions are being closed.

OI change with price change: 'buildup' labels

• Price up and OI up: long buildup (new buying).
• Price down and OI up: short buildup (new selling).
• Price down and OI down: long unwinding (buyers leaving).
• Price up and OI down: short covering (sellers leaving).

These labels describe what happened to that contract. They do not say who is on the other side, and one trader's hedge can look like another's directional bet.

PCR and max pain

• Put-call ratio (PCR) = total put OI ÷ total call OI. Traders watch it as a rough mood gauge, and different people read the same number in opposite ways.
• Max pain is the strike at which the combined payout to all option buyers at expiry would be smallest. It is a calculation from today's OI, and the market does not have to settle there.

Strikes with large OI

Strikes with very large call OI or put OI are often discussed as possible resistance or support zones. This is a common way of reading the chain, but it is an observation, not a rule: large OI can be a hedge, can shift quickly, and often breaks.

Caution. OI-based readings are tools for thinking, not signals. Treat each one as a question to investigate, never as an instruction.