Entries & Exits
Option Pricing Table Basics
Decoding an options pricing table is fairly simple and in this quick video tutorial we'll help you go through all of the different sections that you should understand. The key points to remember about looking at options pricing tables are the different contract months, their time until expiration, strike prices, and underlying option prices. We'll also point out some different areas that you can customize to fit your particular trading style like probability of profit, return on capital, and the Greeks.
We’re going to talk about option pricing tables in this video, so let’s get right into it here as always. And we’re on my Thinkorswim platform here, and we’re just the ticker symbol for Apple, so AAPL.
Basically what an option pricing table is it shows all the available options for a particular underlying stock or ETF or index. In this case, we’re going to look at Apple here. And most times, the broker platform…
And it may be a little bit different on your platform, but we’ll have a couple of tabs, one for the underlying shares. And you can see that if I just type in the ticker symbol for Apple, they have this underlying shares tab here which is just a dropdown and I can easily trade the actual stock of Apple.
But I’m not interested in the stock. I want the options. You can see I’ll just open up this options grid. Now, underneath the actual options grid, you'll see all the different expiration months that are available for Apple stock.
In this case, we have options available all the way until January of 2014. Now, all these different expiration months have corresponding expiration days until expiration.
And you can see that on Thinkorswim, they make it easy because we just hover over the 18 for example and you can see that there are 18 days until the last trading day of the December 2011 contracts. You can see that there are 53 days for the January 2012 contracts, 53 days until the last trading day or expiration.
If we open up this option pricing table, you’ll see that most times, you’re going to have the calls listed on the left-hand side of the screen and you can see that here by the calls right there. On the right-hand side of the screen, you’re going to see the puts which are listed here.
And the puts are always going to be typically on the right-hand side of the screen. Now, down the middle of the option pricing table, you’re going to see the strike prices and the expiration month just to confirm.
You can see that we’ve opened up the December 2011 contracts and we have December 2011 all the way down the middle here. Now, down the middle as well are all the strike prices. These strike prices will be the strike prices for both the calls and the puts. It just depends on which side of the pricing table you’re working under as to which side of the trade you’re going to get on.
Let’s just say for example that we’re at this strike price here at 375 for Apple, so that would be about an at the money call or put and you can see that Apple is trading at 375.
Now, on either side of the expiration period and the strike prices, you’re going to always have the bid and the ask prices for the individual options. This is for the options, this is not for the Apple stock, and each price corresponds with each strike price.
The bid and the ask here on this row, 10.65 and 10.80 correspond with a strike price of 375 for the call side. On the put side, the bid and the asking price is 9.45 and 9.60. You can see that there's a difference because we’re dealing in puts on the right-hand side of the screen and in calls on the left-hand side of the screen.
Now, you can have a bunch of different varying factors besides the bid and the ask. The bid and the ask are usually the ones that are always up there. But for example, I have up here in my layouts that I have the last price traded which is usually the in-between price between the bid and the ask or the mark or the middle and then the net change on the day.
Now, I can easily change this to some different things. I can see the last trade size on the day was four contracts. I could even see the percentage change on the day. You can see that this option went down by 47% in one day.
It had a really big rally today, so you see why that's different. And then I can even see the open or the high or the low, so let’s just see what the high of the day was. And you can see that the high for this option of the day was 13.50. There are just tons and tons of different things you could choose.
You can choose the mark, the last size, the net change on the day which is the dollar figure, the percentage change, the size, the bid ask size, the open, the high of the day, the low of the day, total open interest or remaining open interest, volume on the day, and then you can look at any positions that you have.
We can just see the volume, and you can see that here that the volume on the day was almost 4,000 contracts traded for this particular 375 put on Apple. You can see that on the call side, the volume is a little bit different.
There is almost 4,600 traded today on the call side, a little bit different than the put side obviously. That’s your basic option pricing table layout. You can change all of these different factors and have custom layouts.
You can see here I have a bunch of different layouts that I’ve already prescribed in here, I’ve got some position, intrinsic data, some implied volatility, volume, theoretical pricing and mark, I’ve even got some Delta, Gamma, Theta, Vega, so all the Greeks, so I can easily change my layout and go directly to the Greeks and look at all the different Greeks for all these different options.
But the pricing table is powerful to quickly analyze a lot of trades. You can open up multiple pricing tables at the same time and analyze different securities that way. Hopefully this has been helpful for you guys. As always, like I said, the pricing table is one of the most powerful things you can look at.
And obviously, you want to take your time and understand all of the unique features that it has to offer. Hey, thanks for watching this video from Option Alpha.
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