How to Read an Option Chain

How to Read an Option Chain

Option chains are how prices for options are presented for any given security. The chain tells investors and traders the various strike prices, expiration dates and whether the option symbol represents calls or puts. A seasoned option trader can simply tell a call or put and when it expires by the designated lettering. Memorizing this is not necessary.

Each security is assigned an option symbol. The first 3 letters of the symbol represent the security. The first 3 letters of the option symbol may or may not be similar to the stock symbol. For example, Costco Wholesale’s option symbol is PRQ whereas IBM’s symbol is IBM. The second set of letters represent the expiration month code and the strike price code.

Expiration
Month Codes

Month	Call	Put
January	A	M
February	B	N
March	C	O
April	D	P
May	E	Q
June	F	R
July	G	S
August	H	T
September	I	U
October	J	V
November	K	W
December	L	X

Standard Strike Price Codes

Strike					Price Code	Strike						Price Code
5	105	205	305	405	A	55	155	255	355	455	555	K
10	110	210	310	410	B	60	160	260	360	460	560	L
15	115	215	315	415	C	65	165	265	365	465	565	M
20	120	220	320	420	D	70	170	270	370	470	570	N
25	125	225	325	425	E	75	175	275	375	475	575	O
30	130	230	330	430	F	80	180	280	380	480	580	P
35	135	235	335	435	G	85	185	285	385	485	585	Q
40	140	240	340	440	H	90	190	290	390	490	590	R
45	145	245	345	445	I	95	195	295	395	495	595	S
50	150	250	350	450	J	100	200	300	400	500	600	T

For example, let’s look at the symbol PRQ IK. PRQ represents the company, Costco Wholesale. I is the expiration month, September and K is the strike price 55. Let’s look at an actual detailed option quote chain.

COST (COSTCO
WHOLESALE CORP) 57.00 -1.29

Sep 08, 2007 @ 14:54 ET

Bid
57.04 Ask 57.08 Vol 6050944

Calls	Strike	Last Sale	Bid	Ask	Vol	Pen Int	Puts	Strike	Last Sale	Bid	Ask	Vol	Open Int
07Sep	52.50 (PRQ IA)	4.60	4.70	4.90	10	425	07Sep	52.50 (PRQ UA)	0.15	0.05	0.15	2	808
07Sep	55.00 (PRQ IK)	2.65	2.55	2.70	45	381	07Sep	55.00 (PRQ UK)	0.45	0.40	0.50	52	9474
07Sep	57.50 (PRQ IB)	1.00	1.00	1.10	99	4301	07Sep	57.50 (PRQ UB)	1.45	1.30	1.45	75	2184
07Sep	60.00 (PRQ IL)	0.35	0.25	0.35	116	3538	07Sep	60.00 (PRQ UL)	3.10	3.00	3.20	112	5740
07Oct	52.50 (PRQ JA)	5.50	5.40	5.60	14	816	07Oct	52.50 (PRQ VA)	0.70	0.60	0.70	207	2106
07Oct	55.00 (PRQ JK)	3.50	3.60	3.70	21	4691	07Oct	55.00 (PRQ VK)	1.30	1.20	1.30	100	7201
07Oct	57.50 (PRQ JB)	2.10	2.15	2.25	58	4251	07Oct	57.50 (PRQ VB)	2.35	2.25	2.35	110	5270
07Oct	60.00 (PRQ JL)	1.20	1.15	1.25	324	8153	07Oct	60.00 (PRQ VL)	3.80	3.70	3.9	56	8560

Strike Price: The stated price per share for which underlying stock can be purchased or sold upon exercise of the option contract. (Option quotes do not reflect lot size. A purchase of 1 options represents 100 shares of stock. If you purchase one call at the 52.50 strike for $4.90, your total investment would be 100 x 4.90 or $490.00)

Last Sale: The last price the option traded at. Option traders must be careful here. (If an option has not traded, the last sale price may be days old. Check to make sure your option had trading volume).

Bid/Ask: The Bid price is the price you get if you were to write (sell) an option. The Ask price is the price you have to pay to purchase an option.

Volume: The volume indicates the number of option contracts that have traded for the current day.

Open Interest: The total number of derivative contracts traded that have not yet been liquidated either by an offsetting derivative transaction or by delivery.

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