Options Chain Annotator
Learn to read and interpret options chains like a professional trader. Click on any term to see detailed explanations.
Bid/Ask Spread
The bid price is what buyers are willing to pay for the option. The ask price is what sellers are asking for it.
Spread = Ask - Bid
A wide spread indicates lower liquidity. Market makers profit from this spread - they buy at the bid and sell at the ask.
Open Interest
The total number of outstanding option contracts that have been traded but not yet liquidated.
High Open Interest = More liquidity
Shows trader interest in a particular strike. Increasing OI suggests new positions being opened, decreasing suggests positions being closed.
Implied Volatility (IV)
The market's forecast of a likely movement in a security's price.
IV = Market's expectation of future volatility
High IV means expensive options (seller advantage). Low IV means cheap options (buyer advantage). IV is annualized and expressed as a percentage.
Volume
The number of contracts traded during the current session.
Volume ≠ Open Interest
High volume with increasing OI suggests new positions. High volume with flat/decreasing OI suggests position adjustments or closing.
Sample Options Chain
| Strike |
Call Bid |
Call Ask |
Call OI |
Put Bid |
Put Ask |
Put OI |
IV |
| 100 |
15.20 |
15.50 |
1,234 |
2.10 |
2.30 |
876 |
32% |
| 105 |
12.10 |
12.40 |
2,345 |
3.20 |
3.45 |
1,234 |
34% |
| 110 |
9.50 |
9.80 |
3,456 |
5.10 |
5.35 |
2,345 |
36% |
Key Insights from Options Chains
- Bid/Ask Spread: Wider spreads mean higher transaction costs. Look for liquid options with tight spreads.
- Open Interest: Focus on strikes with high OI - these are where most traders have positions.
- Implied Volatility: Compare current IV to historical ranges. High IV favors sellers, low IV favors buyers.
- Volume: Unusual volume spikes can indicate institutional activity or breaking news.
Remember: Options chains show the current market, not where it's going. Use them to understand positioning, not predict price.
How Professionals Use Options Chains
Institutional traders look for:
- Skew: Differences in IV between strikes (often shows market fears)
- Volume/OI Ratios: Unusual activity relative to normal patterns
- Liquidity Concentration: Where the most open interest sits (potential support/resistance)
Retail traders often focus too much on single strikes. Professionals look at the entire chain for structural insights.