Understanding the Options Chain – Your ultimate guide to learn how to use option chain
With all the numbers, columns, and possible movement that might take place during an open market, the Option Chain can seem frightening at first glance. By the end of Allison’s Understanding the Options Chain course, you will have a better understanding of the options chain and how to trade it.
When a trader looks at the Options Chain, the most popular terminology used by Option traders is call and put. Within a certain time frame and at an agreed-upon price, a call is an option to purchase a stock (bond, commodity, etc.). For those who own stocks, bonds, or commodities as well as the option to sell some of their underlying assets at a certain price within a specified time frame, this is known as a put.
The rising row of numbers in the center of the Option Chain is the next element that catches a trader’s eye. Option Strikes are a term for these numbers. You may purchase or sell an underlying asset at a predetermined price using options.
The horizontal drop-down boxes with dates are the next element that could capture the eye of a trader when looking at the Option Chain. Expiration dates are the term for these dates. When you click the drop-down box, the trader will be presented with a selection of possible strikes for the date you selected. A trader’s strike will begin to exhibit greater intrinsic value as the expiry date approaches, but the extrinsic value on the strikes will diminish.
What is an option chain and how to read charts for options trading?
Option chains, also known as option matrices, are a list of all the option contracts that may be purchased for a certain asset. For a particular maturity period, it displays all of the put and call options that have been offered, as well as their expiry dates, strike prices, and volume and pricing data. According to the expiry date, it’s common to divide the chain into calls and puts.
While an options series or cycle just indicates the possible strike prices or expiry dates, an options chain offers extensive quotation and price information.
For retail investors, option chains are perhaps the most natural way to provide information. The choice quotations are arranged in a logical order for ease of comprehension. When looking for an option premium, traders should pay attention to the expiration dates and strike prices for the underlying security. Mid-quotes, or bid-ask quotes, may also be shown in an option chain depending on the presentation of the data.
Getting to know your trading expert – Allison Ostrander
Simpler Trading’s Director of Risk Tolerance, Allison Ostrander, earned a Bachelor of Fine Arts in Theater from Stephen F. Austin State University.
Allison’s decade of options trading experience allowed her to grow as a trader and share her skills with other members. One of the best ways to learn about trading is to watch her videos or blog entries. Her expertise shows through. She knows what it’s like to go through the ups and downs of trading since she’s seen it happen to other people. By helping traders reduce their losses, she hopes to help them shine brighter than ever before. Allison has the ability to explain both simple and complicated trading methods and chart patterns. Any trader may benefit from her fresh point of view on capital risk, the chart, and the option chain.