Module 10 · Greeks, IV, OI, PCR and max pain · 4 min
Open interest, PCR and max pain
Next to volume, an option chain shows OI, PCR and max pain. They tell you where contracts are open, not what will happen next.
Open interest (OI)
OI is the number of contracts still open. A new buyer meeting a new seller adds 1; two holders closing removes 1. Volume is the day's trading; OI is what remains open.
Four OI patterns
Price up + OI up = long buildup. Price down + OI up = short buildup. Price up + OI down = short covering. Price down + OI down = long unwinding. These are labels, not forecasts.
PCR
PCR = total put OI / total call OI. Example: put OI 12 lakh, call OI 10 lakh = PCR 1.2. Traders read it as sentiment, but deciding on one number is risky.
Max pain
Max pain is the strike where option buyers together would receive the least at expiry. Sometimes the price ends near it, often it doesn't; it is not a guarantee.
Quiz (3 questions)
1. A new buyer meets a new seller. OI?
2. Put OI 15 lakh, call OI 10 lakh. PCR?
3. Price fell and OI rose. The label?
This is for learning only, not advice on any stock or trade.