Options Tables & Options Chains

Basic Options Chain

The most basic options chain is the one that a lot of options traders would probably use the most. It's certainly the most useful for beginner traders, and for those traders that use straightforward trading strategies that involve simply buying call options and/or put options with a view to selling them for a profit.

Chains of this type display call options and put options relating to the same underlying security on the same screen, with varying strike prices. Although there's no standard format for these, they will typically list call options on the left hand side and put options on the right hand side. There will be a variety of columns, with each one containing relevant information to each of the listed contracts.

Even though the format and the information included can vary at different brokers, you can expect most basic options chains to have columns containing the following information:

Options Symbol: This is essentially the name of the option, and each option has its own symbol. It's an indication of the underlying security, the expiration month, and the strike price. A good understanding of these symbols used to be quite important when trading options, but given that it's so easy to see the relevant information using chains, it isn't really that important anymore. When placing an order using an online broker you don’t have to enter the symbol of the contract you wish to trade, you simply click on the relevant contract.

Expiration Date: The expiration date of a contract can be displayed in one of the columns. However, it's actually more common to show all the contracts with the same underlying security and same expiration date on one page, meaning that a column for the expiration date is unnecessary.

Strike Price: The strike price is usually displayed in the middle column of a basic chain, with call options and put options with the same strike price being displayed on the same row. As already mentioned, you can expect to see calls on the left and puts on the right.

Bid Price: The bid price is displayed to show you at what price you can sell the contract. Most options contracts are bought and sold in lots of 100, so you would usually multiply this price by 100 to get the actual price you would need to pay.

Ask Price: The ask price is displayed to show you at what price you can buy the contract, and the same rule regarding lots of 100 applies. The difference between the bid price and the ask price is the bid ask spread, and some chains will also display the size of the spread. The size of the bid ask spread will give you an idea of the liquidity of the option because, generally speaking, the smaller the spread the more liquid it is.

Last Price: The last price shows you the last price at which the contract was transacted at. This isn't a particularly relevant piece of information in options trading, because the last transaction could have been some time ago, or before a significant change in the price of the underlying security. The bid price and the ask price are much more accurate indicators of the current market value.

Volume: This piece of information shows how many of the option has been bought and sold during the current trading day. Volume is another good indicator of liquidity, because higher volume typically means higher liquidity.

Open Interest: Open interest relates to the number of open positions involving the option i.e. the number of contracts that have been written but that haven'tt yet been expired, exercised, or bought back by the writer. This is also useful for determining liquidity as high open interest will usually mean high liquidity.

Options Pricer

An options pricer is useful for looking at how market conditions may have an impact on the price of an option you are considering trading. They typically contain the same information as basic chains, with the addition of the five options Greeks. The options Greeks: Delta, Gamma, Theta, Vega, and Rho are used to measure price sensitivity in relation to changes in the price of the underlying security, volatility, time decay, and interest rate. This is a quite complex subject matter in its own right, and for a pricer to be of any use to you, you really need to fully understand the options Greeks and how to interpret them.

Because pricers contain more information than basic chain, they will typically display only calls or only puts on the screen. To compare calls to puts using a pricer you would need to switch between two separate tables.

Pricers are usually interactive and enable you to adjust certain variables in order to get a theoretical value of an option. What this means in practice is that you can get an estimate of what a contract may be worth under specific circumstances. You can make adjustments to variables that may affect the value of a contract, such as the number of days until expiration or the price of the underlying security. The pricer will then calculate a theoretical value of what the contract might be worth in those circumstances.

For example, if you felt that the underlying security would be trading at $25 with 20 days to expiration, then you could input those variables and then see what the various contracts would theoretically be worth in those circumstances. Obviously there is no guarantee that the theoretical value will be accurate, but it can certainly be a useful guide.

Once you know how to use pricers effectively, they can be very useful indeed. The fact that you can see all the relevant options Greeks can help you assess all the various risk parameters of any given contract before entering a trade. However, you do need a reasonably advanced knowledge and be able to use your own knowledge and opinions of current and future market conditions. It's fair to say the beginner traders would be better suited to using basic chains until a decent amount of experience can be gained.

Options Strategy Chain

Options strategy chains are incredibly useful to traders that use any of the more advanced trading strategies. There are a number of standardized strategies that involve entering multiple positions, or legs, that are effectively combined into one position and planning such positions can involve a fair amount of work. You need to calculate the relevant cost of taking the position, the margin requirements, and other factors.

Many online brokers allow you to view strategy chains for most of these standardized strategies and these chains effectively do a number of the calculations for you and display some very helpful information.

For example, you might be planning to create a butterfly spread, which involves three separate trades. By looking at an strategy chain for a butterfly spread you would be able to view quotes and other information for each individual trade. As the butterfly spread is a debit spread (meaning there is an upfront cost involved) you will also be able to see the net cost of creating the spread. If you were creating a credit spread (meaning you received an upfront payment but would be exposed to potential losses), you would be able to see the margin needed for creating the spread.

As with pricers, strategy chains are really not for beginner traders, because a fair amount of knowledge is required. They are, however, of great benefit to more experienced traders who are using complex strategies on a regular basis. Although they don’t actually provide any information that you wouldn’t be able to calculate yourself, the time saving aspect of having those calculations done for you is potentially very valuable.