The options market allows you to speculate on the direction of stock prices -- without buying any stock. An options contract represents an agreement to buy or sell 100 shares of a stock at a specific price, within a limited period of time. Some research into basic measurements of options performance will be necessary, including the important metric known as volume.
Access an options quotation platform online. Several are available without subscription, although during market hours their information is delayed by 15 or 20 minutes. For live "streaming" quotes, you usually must pay a subscription fee. Yahoo! Finance offers an Options Center under the Investing tab, where you can access price and volume of all traded options. The Chicago Board of Exchange also offers detailed option quotations.Step 2
Enter the ticker symbol for the option you're interested in. If you don't know the ticker symbol, use the provided search feature and then enter the name or ticker symbol of the underlying stock. You also can go to the quotation board for the stock, which on most sites will have a link to the associated options. Option quote boards break out the "option chains" by strike price (the agreed-upon price to buy or sell the stock) and the month of expiration. A listing of "IBM 13 Jan 145.00," for example, represents an IBM option expiring in January 2013, with a strike price of $145.Step 3
Access the quote board and find the volume column (often abbreviated "vol"). Volume represents the number of contracts traded during the current or latest market session. The higher the volume, the greater the number of options traded. In general, a higher volume means a lower spread between the "bid" and "ask" prices, the prices at which you can sell or buy the option. Lower spreads mean a better chance of profiting from the trade.
Items you will need
- Options quotation platform
- Don't confuse volume with "open interest." The latter represents the number of contracts outstanding. When an option position of 100 contracts is closed out, open interest declines by 100, but volume for the day of the trade increases by 100.
- Option volume is highest in the weeks and days before expiration, and at strike prices closest to the current price. However, buying or selling an option soon to expire represents a riskier trade, as the "time value" of the option is rapidly deteriorating. Options with months to go before expiration offer less risk and more stable prices.
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