Option Cheat Sheet

Profit Table

Option Style Opening Transaction Profit When
Call Buy price increases green
Call Sell price decreases red
Put Buy price decreases red
Put Sell price increases green

Important Definitions

  1. Call option - Contract that gives the buyer the right to buy stock from the seller at the low strike price and sell the same stock to the market for the higher market price.
  2. Put option - Contract that gives the buyer the right to buy the stock from the market at the lower market price and then sell the same stock to the seller at the high strike price.
  3. Strike Price - The price where the underlying stock would have to be (or better) in order to exercise the option.
  4. Option Expiration - Stated as the month and year in which the option contract expires. It is typically the close of trading on the third Friday of the month.
  5. In the money - Term used to describe an option where the market price of the underlying stock is above (for Call Option) or below (for Put Option) the strike price.
  6. Intrinsic value - That portion of the option premium that correlates to how much it is "in the money".
  7. Time value - That portion of the option premium that is not Intrinsic Value. The farther away the current date is from the expiration date, the more Time Value you have.
  8. Net Debit - Type of transaction where you end up paying money to either open or close a position.
  9. Net Credit - Type of transaction where you receive money to open or close a position.

Option Naming Scheme

The table below will show you how to interpret the option chains you see on any website which lists option chains. This first table will list all the codes used to represent the expiration month. So if you see an IBM option quote for IBMEA.X you will notice of course that the first 3 characters are for the IBM ticker itself. The next character is "E" which you will find in the table below.

Month Call Put
January A M
February B N
March C O
April D P
May E Q
June F R
July G S
August H T
September I U
October J V
November K W
December L X


The table below will show you how to interpret the rest of the IBM option symbol IBMEA.X. We know that IBM is the company ticker and that "E" is the expiration month. But what about "A"? Well you can see from the chart below that "A" represents the strike price $105. That last part of the quote (".X") is used by some people to identify that security as an option type.

Code Strike Prices
A 5 105 205 305 405 505
B 10 110 210 310 410 510
C 15 115 215 315 415 515
D 20 120 220 320 420 520
E 25 125 225 325 425 525
F 30 130 230 330 430 530
G 35 135 235 335 435 535
H 40 140 240 340 440 540
I 45 145 245 345 445 545
J 50 150 250 350 450 550
K 55 155 255 355 455 555
L 60 160 260 360 460 560
M 65 165 265 365 465 565
N 70 170 270 370 470 570
O 75 175 275 375 475 575
P 80 180 280 380 480 580
Q 85 185 285 385 485 585
R 90 190 290 390 490 590
S 95 195 295 395 495 595
T 100 200 300 400 500 600
U 7.5 37.5 67.5 97.5 127.5 157.5
V 12.5 42.5 72.5 102.5 132.5 162.5
W 17.5 47.5 77.5 107.5 137.5 167.5
X 22.5 52.5 82.5 112.5 142.5 172.5
Y 27.5 57.5 87.5 117.5 147.5 177.5
Z 32.5 62.5 92.5 122.5 152.5 182.5