{"id":17,"date":"2015-01-01T14:06:35","date_gmt":"2015-01-01T19:06:35","guid":{"rendered":"\/?p=17"},"modified":"2016-07-05T15:49:08","modified_gmt":"2016-07-05T19:49:08","slug":"options-chain","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/options-chain\/","title":{"rendered":"01) Options Chain"},"content":{"rendered":"

As an options trader, you\u2019ll be looking at an options chain very often. \u00a0So, it\u2019s good to have a strong understanding of each of its common parts.<\/p>\n

Let\u2019s start out by looking at AAPL\u2019s options chain on TD Ameritrade.<\/p>\n

Expiration Dates<\/b><\/h3>\n

You\u2019ll see that the chain is grouped in dates. \u00a0Those are the different expiration dates for contracts which usually include Weekly, Monthly and Yearly (LEAP) options.<\/p>\n

Left and Right Side of the Chain<\/b><\/h3>\n

To go the next step deeper into the options chain, you will see the chain is commonly aligned with calls <\/b>on the left and puts <\/b>on the right.<\/p>\n

Strike Price<\/b><\/h3>\n

The last way the chain is grouped is by the Strike Price of a given contract. \u00a0We will go into strike price more in a future lesson. \u00a0It is the price at which the options contract can be exercised.<\/p>\n

Note, this does NOT mean the stock has to be above this price to sell your options contract. \u00a0It just means that when the expiration date is reached, if the stock\u2019s <\/b>price is equal to or greater than the strike <\/b>price, you will have the right to buy the stock at that strike price. \u00a0If the stock is below your strike price, then the contracts expire worthless.<\/p>\n

Moneyness<\/b><\/h3>\n

You\u2019ll notice that some of the strike prices are highlighted with an orange background. This means they are In-The-Money<\/b> (ITM).<\/p>\n

For calls, ITM strike prices are less than<\/b> \u00a0the underlying stock\u2019s current price.<\/p>\n

For puts, ITM strike prices are greater than <\/b>the underlying stock\u2019s current price.<\/p>\n

The opposite is true for Out-of-The-Money <\/b>(OTM) strike prices<\/p>\n

For calls, OTM strike prices are greater than<\/b> \u00a0the underlying stock\u2019s current price.<\/p>\n

For puts, OTM strike prices are less than <\/b>the underlying stock\u2019s current price.<\/p>\n

Finally there\u2019s a common Moneyness phrase At-The-Money<\/b><\/p>\n

This just means the strike price is VERY close to the current price of the underlying stock. \u00a0This is the same for calls and puts<\/p>\n

Bids and Asks<\/b><\/h3>\n

Next, let\u2019s look at the Bid and Ask prices. \u00a0Again, we\u2019ll get more into these in a future lesson, but let\u2019s just discuss the basics of them here. \u00a0The Bid <\/b>price can be thought of as the price you can market <\/b>sell <\/i>that particular contract. \u00a0And, the Ask <\/b>price can be thought of as the price at which you can market <\/b>buy <\/i>that particular contract.<\/p>\n

Volume and Open Interest<\/b><\/h3>\n

Finally, let\u2019s talk about Volume <\/i><\/b>and Open Interest. \u00a0<\/i><\/b><\/p>\n

Volume <\/b>on the options chain is the measure of total contracts traded during a given trading day, which helps to give you insight into which particular strike prices are being traded the most on that day.<\/p>\n

Open Interest <\/b>on the other hand shows you the total contracts being held by investors for the duration of that contract\u2019s lifetime.<\/p>\n

So, as long as a particular contract isn\u2019t liquidated by the purchasing investors exercised or offset by another trade, then it will be added to the total Open Interest.<\/p>\n

This is a good indicator to see where the largest amount of \u201cbets\u201d are being placed by strike and call or put. \u00a0We\u2019ll look into this more in a future lesson.<\/p>\n