How To Read An Options Chart
Blog 3: How To Read An Options Chart
Sam Hooker
In this blog post I will take you through how an analyst would read an options chain, a list of options currently being sold in the open market. The screenshot below shows the current options available for Apple on November 7th, 2018. This data was taken from the Chicago Board Options Exchange, the world’s largest options market.
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The first option listed “AAPL1809K170-E” means that the ticker is AAPL for the company Apple. “1809” means that the option expires in 2018 on the 9th of November. The month is listed above the table so does not need to be included in the strike column. The last three numbers “170” means that the strike price, the price at which a buyer could trade his options for the real stock, is $170.
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Last means the price of the last trade that went through. Net means how much the last price has changed since the previous close. Bid means the price at which buyers are willing to buy the option. The Ask is the price that the seller wishes to receive to issue an option. For instance, for the first option listed, the seller is looking to get $37.85 for this option. The last bid for this option was $37.60, but the last trade that went through came in at $33.34.
The next column, volume lets you know how many contracts have been traded during the session. Options with larger volumes, more demand, generally have a tighter bid-ask spread since traders are looking to get in and get out and are trading daily. Int stands for open interest, or the number of open positions in the contract that have not been sold. In this case, 0 contracts have been traded during this session of this particular option, but 247 are still open.
To begin to analyze this option an investor would want to see what the breakeven point of this option is. To do this you would want to add the strike price to the bid price, assuming the seller accepts the most recent bid. The strike price ($170) + bid (37.60) = 207.60. This means that if the stock price rises above 207.6 the buyer can call the option and make the spread above 207.60. The current stock price of Apple is 207.77, so by purchasing this option you are making 10 cents, without accounting for broker commissions. That is why the volume on this option for today is 0.
The last option “AAPL1809207.5-E” with a bid of 1.59 means that the stock price has to be above 207.5 + 1.59 = 209.09. With the stock price at 207.6, this is extremely likely, which is why the volume for this trading session is at 3,223.