How to Read the Options Chain
Navigate the options chain to find contracts, compare premiums, and assess risk/reward across different strikes and expirations.
The chain is every strike and expiry for an underlying, with prices and activity beside each. Read it in two passes: across the strikes to see where the market thinks price might go, and down the expiries to see what time costs. Volume and open interest tell you which contracts you can actually get out of.
Before you start
- An underlying selected. The chain is readable without a position, which makes it the cheapest way to learn option pricing.
Access the Options Chain
Open the Options screen and select an underlying asset. The options chain displays all available contracts in a table format. Expiration dates are listed across the top, while strike prices run vertically. Calls appear on the left side and puts on the right.
Read the Table Columns
Key columns include: Bid (the price buyers are offering), Ask (the price sellers want), Last (most recent trade price), Volume (number of contracts traded today), Open Interest (total outstanding contracts), and Implied Volatility (IV, a measure of expected price movement).
Identify ITM, ATM, and OTM Contracts
Contracts where the strike price favors the holder are In-the-Money (ITM), highlighted differently on the chain. At-the-Money (ATM) contracts have strike prices nearest the current market price. Out-of-the-Money (OTM) contracts would have no value if exercised now but may become profitable before expiration.
Compare Across Expirations
Toggle between expiration dates to compare premiums. Longer-dated options cost more because they have more time for the underlying price to move (higher time value). Shorter expirations are cheaper but decay faster as the expiration date approaches.
Use the Chain for Strategy Planning
Use the options chain to identify opportunities that match your market view and risk tolerance. Look for high volume and tight bid-ask spreads, which indicate liquid contracts that are easier to enter and exit. The IV column helps you assess whether options are relatively cheap or expensive compared to historical norms.
If something goes wrong
- Some strikes show no prices.
- No quotes on that strike. Illiquid strikes are difficult to exit at a fair price, whatever the theoretical value says.
- The same strike costs far more on a later expiry.
- That is time value. More time means more chance of ending in the money, and you pay for it.
Frequently asked questions
- What do ITM, ATM and OTM mean?
- In, at, or out of the money — whether the strike is already favourable against the current price. Out-of-the-money contracts are cheaper and expire worthless more often.
- Why does open interest matter?
- It shows how many contracts are outstanding at that strike, which is a decent proxy for whether you will find a counterparty when you want out.
- Which expiry should I read first?
- The one matching your view's time horizon. A weekly and a quarterly describe very different bets on the same underlying.