CandleFocus Glossary Editor
An option chain is essentially a matrix or table of information that displays various options quotes for a particular underlying security. It is primarily used to assess the value of different call and put options on the same stock. As the stock price fluctuates, so do the values of the options, allowing an investor to spot a potentially profitable opportunity when the markets are volatile.
The chain typically contains strike prices, last prices, trading volume, best bid, and best offer for the available option series. An option’s strike price is the stock price at which the investor buys the stock when the option is exercised. This is the price that appears on the option chain. The last price is the price at which the stock was determined to have been sold at the other end of the most recent transaction. The trading volume refers to the total number of calls and puts traded of a particular option series during the day.
The bid price is the highest price that someone is willing to pay for the option. Conversely, the offer price is the lowest price that someone is willing to sell for the option. For options that are “in the money”—which means that it could potentially be exercised—the bid and offer prices are almost always very close together. For options that are out of the money—meaning that the option cannot be exercised—the bid and ask prices are usually far apart.
An option chain is a valuable tool for investors, as it enables them to tell at a glance how much each option costs and how much activity is currently happening within each option series. Frequently checking option prices and trading volume can help an investor assess the potential risks and rewards associated with the different choices. With this information in hand, the investor can then assess whether or not to enter or exit an options trade.
The chain typically contains strike prices, last prices, trading volume, best bid, and best offer for the available option series. An option’s strike price is the stock price at which the investor buys the stock when the option is exercised. This is the price that appears on the option chain. The last price is the price at which the stock was determined to have been sold at the other end of the most recent transaction. The trading volume refers to the total number of calls and puts traded of a particular option series during the day.
The bid price is the highest price that someone is willing to pay for the option. Conversely, the offer price is the lowest price that someone is willing to sell for the option. For options that are “in the money”—which means that it could potentially be exercised—the bid and offer prices are almost always very close together. For options that are out of the money—meaning that the option cannot be exercised—the bid and ask prices are usually far apart.
An option chain is a valuable tool for investors, as it enables them to tell at a glance how much each option costs and how much activity is currently happening within each option series. Frequently checking option prices and trading volume can help an investor assess the potential risks and rewards associated with the different choices. With this information in hand, the investor can then assess whether or not to enter or exit an options trade.