Deciphering an Options Chart

What's going on everybody!  It's the end of another long week.  I barely survived it.  How about you?  Anyway, I'm glad you made it back.  I thought today I would decipher all the parts of an options chart (aka options chain).  If you're going to trade options this is the primary tool you'll be using to figure out which calls and puts you'll be buying and selling.  Most of the terms I'll be throwing around today were explained in my first three posts.

What you see above is an options chart you'll find on Yahoo! Finance.  This is the site I normally use to  see what's going on in the financial world and check my monthly positions.  So lets talk about all the moving parts here.  I'll start at the top and work my way down.  Lululemon is the name of the company  we're looking at.  No brainer right!  Below the company name and ticker is the price of the stock.  Next to the price is how much it's either risen or dropped during the current trading session.

Under the title Options you see "View by Expiration".  As I mentioned earlier all options have a specific day they expire.  Generally, options expire monthly.  The chart we're looking at is for options that expire during the March 2013 cycle.  Specifically, the third friday of March.  For some reason the people that made the options rules made monthly options always expire on the third friday of each month.

Next you can see that this chart is specifically for Call options.  If I had the entire chart you would see both the Call and Put options for LULU.

Beneath that are the actual option listings.  You can see the column for the Strike prices.  Remember these are the stock prices that the buyers and sellers are placing their trades against.  Next to the strike prices are the unique option symbols created for those particular options.  The next four columns all have to do with the price of the options.  "Last" is the most recent price the option sold for.  The "Chg" column tells you how much the price has increased or decreased since it last sold.  The "Bid" and "Ask" prices are pretty important.  The Bid price is the current market price you would get if you sold the listed option.   The Ask price is the current market price you would have to pay to purchase the  option.  The market makers that process option orders make their money on the spread between the option Bid and Ask prices.  For example, looking at the 35 Strike, I can buy one option for  33.90, which in real life would actually be $3390.00.  In options charting you always have to multiply all the prices by 100!  I know it's a little confusing but don't quit on me yet!

The last two columns are easy peasy!  The "Vol" or volume shows how many options contracts have been traded during the current market session.  And lastly the "Open Int' column shows the total amount of contracts traded for that particular option.

That's it!  If you can understand this chart and everything else we talked about so far you're about 75% ready to get started.  Next time I'll introduce the almighty credit spread.  It's the technique I use to make safe, steady income with options each month!