Info on contracts -
To get a gander on what the pricing is - I usually just go to yahoo finance - we'll use AAPL for the examples:
http://finance.yahoo.com/q?s=AAPL
Then click options on the left
That will bring you to here -
http://finance.yahoo.com/q/op?s=AAPL
Note, from here, they have a "get quotes" button on the left, but a "get options pricing" button on the right - just found that thing the other day.
There are tabs you can click for the options expiration.
They don't use the actual date - they just go by month.
*Tip - before you go in, always look on the calendar - the third friday is always options expiration, unless its a holiday - then i think its thursday (in reality its saturday, but you can't trade that day).
The symbol is the options contract symbol. In scottrade, they use a dot before the symbol. You also use just the 5 letters usually, so some brokerages (I have more than one - so I know they don't use dots) will use
QAAHO for the top contract on that list
.QAAHO will be what scottrade uses
options are leveraged, and the tickers represnt 100 of something, so going across the top... for QAAHO
75.00 means the strike price is 75.00 - that means if you had bought the contract, you have the right to buy 100 shares of AAPL from the seller of the contract (who has 100 shares) at $75.00 a share. You can then hold them forever, or sell them on the market - which they are trading near $159 today... or, you could sell the contract likely at the ask - but the market is closed, so the numbers will change on monday (we'll the numbers except the strike)
Symbol is the symbol of he contract
Last is just like stocks - that was the last price - but it's leveraged so in reality 76.80 means $7680 per contract. Bill, for you, if you put .QAAHO into your scottrader elite, the price would show 76.80, but if you made the trade, it would be $76.80. Note, here the seller is hurting!
Bid, ask and vol are the same.
*Tip: Usually you only get the ask or just shy of the ask when buying, so plan on that accordingly if shit starts hitting the fan.
Volume as you can see is pretty low.
*Tip: Therefore when scouting out trades, you want to see a decent amount of volume and open interest - like in the upper hundreds/thousands. If you are going to flip a contract, you don't want to see numbers like vol = 1, open interest = 30.
Open interest, this is how many contracts are open - note, it's tough to guage how many are newly formed contracts and how many have been traded multiple times. There is a discussion about it in John Murphy's book http://stockcharts.stores.yahoo.net/teanoffimajo.html
You can get this at the library, and decide if you want to buy it - I think its one of the best. Note though, its great for discussion, but after trying my hand at mechanical trading systems, I say don't try to buy and sell macd crossovers etc.
For the trades, we are (rather I am) doing, you don't have to look up that open interest thing, just be aware of the numbers.
The yellow background are those contracts that are in the money - ie. where the strike for a call is below the current market price...
ie I can tell by looking at this chart that the shares of AAPL are between $155 and $160. In the money means if you had the $155 contract, you could "exercise" (meaning buy the 100 shares) and you'd be ahead if you turned around and sold them that instant - ie. if AAPL was $159, you'd make $4 a share instantly if you dumped them, for a profit of $400. Well, once you have the shares, you could sell how many you wanted, so say you sold half, you'd have $200.
My mistake, they do have the expiration date up at the top of the table.
APVHL is "out of the money" meaning, if you exercised that, it would be pretty dumb, as you could have bought AAPL in our example on the open market for $159, so why pay the $160 strike price?????
"At the money" is when you are right on the line - some will have a small buffer. They don't show that here.. but you can figure it out.
Things to note - many brokerages will automatically exercise the option contract at the close on the expiration date if you are in the money - so if you don't want 100 shares of something - you need to tell them not too - but on the other hand, you'll also lose the entire thing - ie. the $7680 for QAAHQ if you don't sell the contract by the close.
Also, take a note at the liquidity - if you were the QAAHQ guy, hopefully there is a rich buyer on the other line - I'm sure there will be, but if you are doing this for some other less thinly traded stock (thinly traded in the option sense) maybe you could miss out -
you can also call your broker ahead of time and say don't exercise these for me - in most cases (we'll at least for the two brokerages I've used for these).
Puts - that's everything in reverse... we'll talk about those later though, I need to work!
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Originally Posted by Sworntwofun
