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Options: How to Read an Option Table

Column 1: Strike Price - This is the stated price per share for which an underlying stock may be purchased (for a call) or sold (for a put) upon the exercise of the option contract. Option strike prices typically move by increments of $2.50 or $5.00 (even though in the above example it moves in $2 increments).

Column 2: Expiration Date - This shows the termination date of an option contract. Remember that U.S.-listed options expire on the third Friday of the month.

Column 3: Call or Put - This column refers to whether the option is a call (C) or put (P).

Column 4: Volume - This indicates the total number of options contracts traded for the day. The total volume of all contracts is listed at the bottom of each table.

Column 5: Bid - This indicates the price someone is willing to pay for the options contract.

Column 6: Ask - This indicates the price at which someone is willing to sell an options contract.

Column 7: Open Interest - Open interest is the number of options contracts that are open; these are contracts that have not expired nor been exercised.

Let's summarize:

  • An option is a contract giving the buyer the right but not the obligation to buy or sell an underlying asset at a specific price on or before a certain date.
  • Options are derivatives because they derive their value from an underlying asset.
  • A call gives the holder the right to buy an asset at a certain price within a specific period of time. A call buyer is hoping for a stock to go up.
  • A put gives the holder the right to sell an asset at a certain price within a specific period of time. A put buyer is hoping for a stock to go down.
  • Both call and put seller are hoping for the option to expire worthless.
  • The price at which an underlying stock can be purchased or sold is called the strike price.
  • The total cost of an option is called the premium, which is determined by factors including the stock price, strike price, and time remaining until expiration.
  • A stock option contract represents 100 shares of the underlying stock.
  • Investors use options both to speculate and to hedge risk.
  • Employee stock options are different from listed options because they are a contract between the company and the holder.
  • The two main classifications of options are American and European.
  • Long term options that are 1 to 5 years away are known as LEAPS.

Related Links:
Archives of "Investing in Options"- Our regular options education column discusses everything from the basics of options to complex strategies.

The ABCs of Option Volatility - Many option traders rarely assess the market value of an option before establishing a position. Why is this?

Another derivative security similar to options is a future. Check out our section on futures.

Other riskier methods of trading stock are short selling and buying on margin.

If you want to learn more about options, learn from the best at Optionetics. Optionetics.com is one of our favorite options sites. Optionetics is great for quotes, education, articles, discussion, etc.

Options Industry Council - get a FREE CD-ROM with over 400 tutorials and 40 interactive strategies on options investing.

Barkley Financial - Get a very informative free CD-ROM on options/futures investing.

Free Package on Selling Options - If 90% of options expire worthless, shouldn't you think about selling options? Get this package explaining option selling strategies in more detail.

FREE Options Trading Manual - The manual BluePrint for Options Success teaches you how to avoid costly errors and how to take control of your trades.

The Chicago Board Options Exchange - The CBOE is the world's largest options market and is a market leader in new product and technological innovation.

Getting Started with Options - This teaches you everything you need to start trading options like a pro!
 

 

         

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