← BeginnerLesson 6 · 4:28
How do you read an option chain?
Summary
You can find any contract on an option chain by asking four questions in order: which date, which strike, call or put, and buying or selling. You can price it by reading the right side of the quote and multiplying by 100. You can explain why some contracts cost far less than others, and why a low price is not a discount.
Key terms
- option chain
- The table of all option prices on one stock, sorted by expiry date and strike, with calls on one side and puts on the other.
- expiry dates
- strike column
- calls on the left, puts on the right
Check yourself
Answer each question to see why the right answer is right.
1. What are the four questions, in order, that find one exact contract on an option chain?
2. You want to buy the right to sell XYZ at $95 for 30 days. Where do you look, and what does one contract cost?
3. The $110 call costs $66 a contract and the $100 call costs $350. XYZ is at $100 today and finishes at $105. What happens?
4. Why do call prices step down as the strike price goes higher?
5. The ask on the $100 call is $3.50 with 30 days left. You switch the chain to 60 days. What does the same strike cost?
Finished the video and the quiz? .