How to Read an Options Chain Sheet

12/25/2009 12:01 am EST

Focus: OPTIONS

John Jagerson

Co-Founder and Contributor, LearningMarkets.com

Options are most frequently quoted in a list format called a “chain sheet.” Each chain sheet has several components and although they are not complicated, it would be helpful to walk through each section so you understand what to look for when evaluating an option trade.

In the video below, we will be using a typical chain sheet for the stock Microsoft Corp (MSFT) for demonstration. Keep in mind that every online broker uses a slightly different version of a chain sheet. However, they are similar enough that it is usually not a challenge for a trader to shift from one version to another.

Each element of the chain sheet is described below. The numbers reference each element’s position on the image below.

Calls and Puts (1): Chain sheets are arranged with calls on the left side of the list of options and puts on the right side. In some chain sheet versions, the calls and puts are in a single list but the format below is more common.

Strike Prices (2): The available strike prices are listed down the center of the chain sheet. There is a call and a put contract that correspond to each strike price.

Bid and Ask (3): Each call and put at every strike price has a listed bid (sell price) and ask (buy price). These prices are quoted per share, which means that you need to multiply it by the number of shares per contract, or 100. That will tell you how much a single contract will cost to buy, or is worth to sell.

Open Interest (4): The number of contracts of a call or put at a specific strike price currently held by other investors.

Volume (5): The number of contracts of a call or put at a specific strike price bought and sold today.

Extra Info (6): Depending on your broker, there may be several other columns for each option contract. This extra information may include the last trade price, implied volatility, or some of the option Greeks. The most critical information, however, is contained in items 1-5 of the chain sheet.

Watch the video now for more details:

By John Jagerson of LearningMarkets.com

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