The options chain is your window into the options market. It displays all available options for a stock, organized by expiration date and strike price. Learning to read an options chain is essential for anyone who wants to trade options. This guide walks you through every column and teaches you how to use the information.
What is an Options Chain?
An options chain (also called an option table or option board) is a listing of all available option contracts for a particular stock. It shows calls on one side and puts on the other, with the strike price in the middle.
Think of it like a menu: Just as a restaurant menu shows all available dishes with prices, an options chain shows all available option contracts with their prices and key data.
Basic Layout of an Options Chain
A typical options chain has:
- Call options on the left side
- Strike prices in the center column
- Put options on the right side
- Multiple expirations to choose from (usually tabs or dropdown)
The current stock price is usually highlighted, and the chain shows which options are in the money (ITM) and out of the money (OTM).
Understanding Each Column
Strike Price
The price at which you can buy (call) or sell (put) the underlying stock. Strikes are listed in order, typically in $1, $2.50, or $5 increments depending on the stock price.
Example: Strike Selection
Stock XYZ is trading at $73. The options chain might show strikes at:
$65, $67.50, $70, $72.50, $75, $77.50, $80...
Strikes near the current price ($72.50 and $75) are "at the money." Lower strikes are ITM for calls; higher strikes are ITM for puts.
Bid Price
The highest price buyers are currently willing to pay. If you sell an option, you will likely get close to the bid price. Higher bid = more value for sellers.
Ask Price
The lowest price sellers are currently asking. If you buy an option, you will likely pay close to the ask price. Lower ask = better deal for buyers.
Last Price
The price of the most recent trade. This may be outdated if the option has not traded recently. For active options, it will be between bid and ask.
Change
How much the option price has changed today. Usually shown both as a dollar amount and percentage.
Volume
The number of contracts traded today. High volume indicates active trading and usually means better liquidity. Resets to zero each day.
Open Interest (OI)
The total number of contracts currently outstanding. Unlike volume, this does not reset daily. High OI suggests good liquidity and easier trade execution.
Implied Volatility (IV)
The market's expectation of future price movement. Higher IV means options are more expensive. This is crucial for comparing whether options are cheap or expensive.
Pro tip: Compare IV to the stock's historical average. If IV is much higher than usual, options are expensive. If IV is lower than usual, options are cheap.
Greeks (Delta, Gamma, Theta, Vega)
Some chains display the Greeks, which show how sensitive the option is to various factors:
- Delta: How much the option moves per $1 stock move
- Gamma: How fast delta changes
- Theta: How much value the option loses per day
- Vega: How much the option moves per 1% IV change
Reading an Example Options Chain
Example: Interpreting Options Chain Data
Stock ABC at $100. Looking at 30-day expiration $100 calls:
- Bid: $3.50 | Ask: $3.60
- Last: $3.55 | Change: +$0.45 (+15%)
- Volume: 5,234 | Open Interest: 42,000
- IV: 32% | Delta: 0.52
What this tells us:
- Tight spread (only $0.10) - very liquid option
- High volume and OI - active market, easy to trade
- Delta 0.52 - moves about $0.52 for every $1 stock move
- Up 15% today - bullish activity
How to Use the Options Chain
Step 1: Select Your Expiration
Start by choosing when you want the option to expire. Most chains let you switch between expirations using tabs or a dropdown. Consider how much time your trade thesis needs.
Step 2: Identify the Stock Price
Note the current stock price and identify which strikes are ITM, ATM, and OTM. This helps you understand the risk/reward of each strike.
Step 3: Compare Strikes
Look at different strikes and compare their premiums, Greeks, and bid-ask spreads. Decide based on your outlook and risk tolerance.
Step 4: Check Liquidity
Before trading, verify the option has adequate volume and open interest. Check that the bid-ask spread is reasonable (not too wide).
Step 5: Evaluate Volatility
Compare the IV to historical levels. High IV means you are paying more premium; low IV means options are cheaper.
Example: Choosing a Strike
You are bullish on stock at $50 and want to buy calls for next month:
- $45 call (ITM): $6.50, Delta 0.75, Spread $0.10
- $50 call (ATM): $3.00, Delta 0.50, Spread $0.05
- $55 call (OTM): $1.00, Delta 0.25, Spread $0.15
The ATM call has the tightest spread percentage and balanced characteristics. The ITM call is safer but costs more. The OTM call is cheapest but has lower probability and wider spread.
Important Patterns to Notice
High Open Interest at Specific Strikes
Strikes with unusually high OI can act as support/resistance levels. Market makers may hedge around these levels.
Volume Spikes
Sudden high volume at a strike could indicate informed trading or institutional activity.
IV Skew
Compare IV across strikes. Puts usually have higher IV than calls (the "volatility smile"). Unusual skews can signal opportunity.
Put/Call Ratio
Compare total put volume/OI to call volume/OI. High put activity might indicate hedging or bearish sentiment.
Common Options Chain Mistakes
- Ignoring the spread: A cheap option with a wide spread may cost more than you think
- Looking only at price: Consider all factors including IV, Greeks, and liquidity
- Trading illiquid options: Low volume/OI means poor fills and hard exits
- Not comparing expirations: Different expirations have different characteristics and costs
- Forgetting about IV: High IV means expensive options, even if the dollar price looks reasonable
Track Your Options Trading
Pro Trader Dashboard automatically imports your options trades and shows you detailed analysis of your performance. See which strikes and expirations work best for you.
Summary
The options chain displays all available options for a stock with their prices and key data. Calls are on the left, puts on the right, with strike prices in the middle. Key columns include bid, ask, volume, open interest, and implied volatility. Before trading, always check liquidity (volume and OI), spread width, and IV levels. Use the chain to compare strikes and expirations to find the best option for your trading plan.
Now that you understand the options chain, learn about bid-ask spreads and open interest in more detail.