Facebook
Twitter
Over my previous two posts (A & B) I’ve discussed probabilities and why we, as investors, must heed what they tell us when it comes to the market.
And now that we have a basic understanding as to why we must include options strategies at some capacity in our overall portfolios, it’s time to move on to some options basics.
I want to go over what a standard options quote looks like and then we can expand from there.
ABC November 190 Call (SPY141122C190) at $3.50
ABC – the ticker symbol for the stock that the option is based on. It usually represents 100 shares. Remember, 1 options contract is equivalent to 100 shares of stock. However, in this day and age where we have Weeklys, Minis, LEAPS and good ol’ Monthlys, it is important that you ultimately pay attention to the Options Price Reporting Authority (OPRA), which I will touch on in a second.
November – the month the options expires. The last day to trade the option is the third Friday of every month, but as I said before, now we have an abundance of Weeklys, etc. to contend with. So again, paying attention to the OPRA is key.
190 – the strike price for the underlying stock, in this case ABC. This is also the price at which the stock will change hands if the option is exercised. I will go over the basics of exercising an option in a future post.
Call – the type of option. There are only two types of options–calls and puts. I will define both in a future post.
(SPY141122C190) – the options symbol also frequently referred to as the OPRA. The introduction of Weeklys, Minis, etc. have made it imperative that investors/traders pay closer attention to the OPRA when placing an options trade.
$3.50 – The options premium, or per-share cost of the option. Again, options contracts usually represent 100 shares of the underlying stock, with the exception of the recently introduced “minis” which represent 10 shares. So, in this example, you will typically pay $350 (plus commission) for one contract.
I hope this helps give you a good idea what a basic options quote looks like. I’m going to follow this post with a short post on breaking down the OPRA.
If you would like even more ideas regarding options trading, don’t forget to sign up for my free weekly options report, The Strike Price.
How to Make 13% a Month Trading Volatility
I recently held a webinar about the “New Bull Market” in volatility and the options strategies I am using to take advantage of it. If you are interested in learning my approach and how I use probabilities to my advantage please click here.