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📘 Lesson 6: How to Read an Options Chain — Unlock the Info Behind Every Trade
🧠 Core Concept
An Options Chain is the menu of all available option contracts for a stock.
It tells you everything: available strike prices, expiration dates, and key stats like volume, open interest, and bid/ask prices.
Knowing how to read this is essential before placing any trade.
📋 What’s in an Options Chain?
Let’s break down the typical fields in an options chain:
| Column | What It Means |
|---|---|
| Strike | Price at which you can buy (call) or sell (put) the stock |
| Bid | Highest price buyers are willing to pay for the option |
| Ask | Lowest price sellers are willing to sell for |
| Last | The price of the most recent trade |
| Volume | Number of contracts traded today |
| Open Interest (OI) | Total number of outstanding contracts (not yet closed) |
| Implied Volatility (IV) | Market’s estimate of future volatility of the stock |
| Delta, Theta, Vega, Gamma | The Greeks – optional but essential for advanced trading |
✅ What to Look For as a Beginner
1️⃣ Strike Price
Choose a strike that fits your view:
- Calls: Strike price should be below where you expect the stock to rise
- Puts: Strike price should be above where you expect it to fall
2️⃣ Expiration Date
This is when the option will expire.
- Short-term = cheaper but riskier
- Long-term (LEAPS) = more stable, expensive
3️⃣ Volume and Open Interest
- Volume shows daily trading activity
- Open Interest shows how many contracts exist
High OI + High Volume = better liquidity, tighter spreads, easier to get in/out.
📈 Example: AAPL Options Chain Snapshot
| Strike | Bid | Ask | Last | Volume | OI | IV |
|---|---|---|---|---|---|---|
| $100 | 4.90 | 5.10 | 5.00 | 3,200 | 12K | 25.2% |
| $105 | 2.00 | 2.20 | 2.10 | 2,850 | 10K | 26.5% |
| $110 | 0.85 | 1.05 | 0.95 | 1,100 | 6.2K | 28.1% |
✅ The $105 Call has:
- A tight bid-ask spread ($2.00–$2.20)
- High volume and open interest
- Reasonable IV
→ This is likely a good strike for liquidity and execution.
🧮 Call vs Put Layout
Options chains are usually split vertically:
| Left Side | Right Side |
|---|---|
| Call Options | Put Options |
| Buyers expect stock to go up | Buyers expect stock to go down |
Both sides share the same strike prices in the center.
🔎 Tips for Beginners
- Avoid options with low OI and high bid/ask spread → hard to trade
- Start with monthly expirations (e.g., third Friday of each month)
- Use delta 0.60–0.80 for directional trades
- Double-check the implied volatility (high IV = expensive options)
🔁 What Is the “Chain” Part?
The “chain” refers to the list format that shows all strike prices from lowest to highest, across different expiration dates.
You can “unfold” each expiration to see available contracts.
✅ Quick Quiz
- What does “Open Interest” tell you?
- If the bid is $1.00 and ask is $1.30, what’s the spread?
- What’s more important: today’s volume or total open interest?
Cement your knowledge through taking more Stock Options Quizzes
🧠 Answers
- How many contracts are still active (not closed)
- $0.30
- Open Interest, since it shows how much interest there is in the strike
Check out our very own VIXTradingHub Options Chain to see it for yourself!