Alan Ellman breaks down a subscriber’s trade to determine the when is the best time to unwind ...
How to Read & Understand Options Tables
11/26/2013 8:00 am EST
Trading options intimidate a lot of new traders because they think it's complicated, but here Cory Mitchell of ETFdb.com and VantagePointTrading.com explains where to find options data and how to read and understand that data to get you started.
The main source for options pricing and information is the Chicago Board Options Exchange (CBOE), the exchange through which options are traded.
To get an options quote on the www.cboe.com website click on the Quotes and Data section followed by Delayed Quotes. Enter a stock or ETF symbol and then click on the Options tab to see information on the option.
Yahoo! Finance offers options pricing information in a straightforward manner, and includes the same information available on the CBOE website. All options images were obtained from Yahoo! Finance.
Option Table Explained
Just below the price of the ETF, we see "View By Expiration" with a series of dates following it. Figure 1 shows May, 2013 option prices, as indicated by "May13? being selected. If you want to see options that expire during a different month you can select it from the list, remembering that the month represents the month of expiry and the number following it represents the year of expiry. Selecting "Jan 15? for example will show options expiring in January 2015.
Yahoo! Finance lists call options first, followed by put options. To see put option pricing, scroll down the page until you see the section labeled Put Options.
Let's go through what each of the columns means.
Strike (Price): This column shows the price at which a call buyer can purchase the security if the option is exercised. In the case of a put option, it's the price at which the option buyer can sell the underlying security should the option be exercised. On the flip side, an option writer will be assigned to produce the underlying security at the strike price if an option he or she sells (writes) is exercised.
NEXT PAGE: Additional Data to Be Aware of|pagebreak|
Symbol: This element of the options table contains the information for which option you are looking at; it can be broken down into a few major sections. Figure 4 shows what is contained in the symbol.
Last: The price of the last trade that went through.
Chg (Change): Change is how much the Last price has changed since the previous close.
Bid: The price at which buyers are trying to buy the option. If you market sell an option, you'll typically get this price assuming instant execution. This is the price for one share. Since one option is for 100 shares, to get the cost of an option you must multiply this price by 100.
Ask: The price at which sellers are trying to sell the option. If you market buy an option, you'll typically get this price assuming instant execution. This is the price for one share. Since one option is for 100 shares, to get the cost of an option you must multiply this price by 100.
Vol (Volume):Lets you know how many contracts have been traded during the session. Options that have large volume typically have a tighter Bid-Ask spread since more traders are looking to get in and out of positions.
Open Int (Interest): The number of open positions in the contract that have not yet been offset.
Additional Data to Be Aware of
The Greeks are a series of calculations that help determine how an options price moves relative to the underlying asset. While these figures are not shown on all options tables, a basic understanding is helpful when trading options.
Delta: Represents how sensitive an options price is to the price movements in the underlying asset.
Gamma: Since delta is not stagnant, and will constantly be changing, gamma is the measure of how much the delta changes as the value of the underlying security changes.
Theta: A measure of the dollar amount the option price loses each day as it approaches expiry, known as time decay.
Vega: The measure of how an options price reacts to changes in volatility in the underlying asset.
Yahoo! Finance offers simple and relatively easy-to-understand options tables, although options pricing information is available from many other online sources including the CBOE website. Spend some time looking through the tables and seeing how the options are priced-using the Last price or Bid and Ask price-for varying expiry dates and strike prices. This will help you get better at reading the table and seeing how options prices are related to the other information in the table.
Related Articles on OPTIONS
Huge gold credit spread, is one to follow, says Jay Soloff....
Here’s a trade that will last all of 2020 and yield 12.8%, reports Jay Soloff....
What is technical analysis and how can it be used to establish directional options strategies? ...