Option Cheat Sheet
Profit Table
Option Style
|
Opening Transaction
|
Profit When
|
Call
|
Buy
|
price increases
|
Call
|
Sell
|
price decreases
|
Put
|
Buy
|
price decreases
|
Put
|
Sell
|
price increases
|
Important Definitions
-
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.
-
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.
-
Strike Price - The price where the underlying
stock would have to be (or better) in order to exercise the
option.
-
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.
-
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.
-
Intrinsic value - That portion of the option
premium that correlates to how much it is "in the money".
-
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.
-
Net Debit - Type of transaction where you end up
paying money to either open or close a position.
-
Net Credit - Type of transaction where you receive
money to open or close a position.
Option Naming Scheme
The option naming standards are surprisingly easy to understand. Lets break it down with an example:
IBM200619C00050000
Okay lots symbols. But it follows this pattern:
[symbol][Year][Month][Day][Call or Put][strike price]
Pattern
|
Description
|
Symbol
|
The stock symbole. Up to 6 characters if required. Normally 3 to 4.
|
Year
|
2 digit format for year. E.g., 20 for 2020.
|
Month
|
2 digit format for month. E.g., 01 for January.
|
Day
|
2 digit format for the day within the month.
|
Call or Put
|
C for Call. P for put
|
Strike Price
|
8 digits for the strike price. Imagine there is a decimal after the 5th digit. In our example above, '00050000'
would be $50. Another example: IBM210115C00110000 would be for strike price $110.
|
So in our above above example for
IBM200619C00050000, it's shown in our graphic below.
Option Naming Scheme - Prior to 2010
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
|