Traders can purchase one stock option to control 100 shares of stock for a small investment. Buying a call option gives you the right, but not the obligation, to purchase 100 shares of stock. Conversely, buying a put option gives you the right, but not the obligation, to sell 100 shares of stock. Knowing how to read a stock option table is the first step to becoming a successful options trader.
Go to a free online financial news provider such as Yahoo Finance or the Chicago Board of Options Exchange (CBOE). Select a provider and go to the website’s homepage. Type a stock symbol of your choosing into the "get quote" box. Click on the option link to bring up the option table. At the top of the page, you’ll see the stock symbol and the stock’s current price. Scroll down the page and click on straddle view to see the call and put options side by side.Step 2
Look at the first column, Symbol, to find the unique identification number assigned to each call and put option. The next column, Last, shows the call’s or put’s most recent trading price. Because one option controls 100 stock shares, multiply the Last price by 100 to get the total cost. For example, an option with a last price of $5.55 would cost you $555.00 to purchase.Step 3
Move to the next column, Change (Chg), to see how much the option’s price has increased (shown in green) or decreased (shown in red) for the day. The next column, the Bid price, is the offered buy price. The Ask column shows the offered sell price. Volume is the total number of contracts traded for that day. The Open Interest column represents the total number of option contracts that have not been exercised to buy or sell stock shares.Step 4
Look at the middle column, Strike Price, also known as the exercise price. Investors select a strike price, then buy a call or put option to purchase or sell the stock at that strike price. An option’s purchase price depends partly on how close the strike price is to the actual stock price.
- Using Apple as an example, you believe the stock’s price is going to rise to $580 over the next few weeks. You look at the call options and select $580 as the strike price. The last price for the $580 call option was $13, so it will cost you $1,300 ($13 x 100) to buy that call option. If you think Apple’s price will fall to $580, you could select the $580 put strike price, which is selling at $5, and pay $500 ($5 x 100) to buy the put option.
- Option trading can be very volatile. CBOE suggests that investors only trade options with money they can afford to lose.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.