The Option Chain

Which Options Can I Trade?

jnj_001.png
Part of the JNJ Options Chain. Expiration: Feb 13 and Feb 20, 2015. CBOE

A list of the available options that you can trade is called the option chain. The list is sorted by the expiration date (nearest to furthest), and then by the strike price (lowest to highest).

The chain contains information about each option -- including the current bid/ask prices, last price at which the option traded, net price change from yesterday's closing price, along with that today's trading volume and the open interest.

The option chain is available from many sources, including your broker. During market hours, you want to use live (current) data, rather than data that is delayed by 20 minutes. Whenever you are contemplating making a trade, the option chain is your source for current information. Most traders know which option they want to buy or sell, or which option spread they intend to trade. For them, a page with the bid and ask quotes is all that is needed.

However, less experienced traders may want additional information, such as which options are most actively traded (the higher the volume, in general, the better chance of getting a high-quality trade execution).

The novice needs even more information because he/she is unlikely to have a good idea of just which options are listed for trading. (i.e., which expiration dates and the possible strikes).

Example

The image at the top of this article illustrates a portion of the option chain for JNJ (Johnson & Johnson) from the CBOE.

The image includes only a few options that are close to being at the money and which expire on two consecutive Fridays. Many other JNJ options can be bought or sold. Please note that many other JNJ options can be bought or sold and that the option chain changes over time.

The Column Headings

Strike represents the option description.

For example, looking at the call options that expire in February, the symbol JNJ1513L100-E can be broken down as follows:

  1. JNJ is the stock symbol for Johnson & Johnson.
  2. 15 is the year (2015) and 13 is the day of the month date (Feb 13th) that the option expires. Note that the month has already been described in the table header.
  3. B is the 2nd letter of the alphabet and represents February.  The calls are represented by letters A through L -- for Jan through December. The puts use the letters M (Jan) through X (Dec).
  4. 100 is the strike price.
  5. E describes the exchange from which the data is collected. E stands for CBOE.

Last is the most recent price at which this option traded. Caution: For inactive options, this trade may be days or weeks old.

Net is the net change for the day and equals yesterday's closing price minus the last price. This is an unimportant number from a trader's perspective. I encourage you to ignore it.

Bid and Ask represents the current highest published bid price and the lowest published asking price for the option. Note that it is often possible to sell above the bid price and buy below the asking price because some players do not advertise their best prices. Before paying the ask or selling at the bid, it pays to use a bid to attempt to get your order filled at a better price.

Int is the open interest and is updated only once per day -- before the market opens for trading.