Understanding Option Abbreviations
Option values are expressed in abbreviated form, both in listings and in communication between brokers and customers (or between online brokerage services and customers). The abbreviated expressions in the options market go beyond current premium. Both expiration month and striking price are expressed in shorthand form as well. For example, an October option with a striking price of 35 per share is referred to as an OCT 35 option, and a January option with a 50 striking price is called a JAN 50. Like the premium value, striking price is expressed without dollar signs. The complete option description must include all four terms plus current premium: underlying stock, expiration month, striking price, and type of option (call or put).
Wal-Mart JAN 08 $50 Call at 2.70When you call a broker on the telephone or log onto a web site and place a trade, an additional coding system is used to specify the expiration month and striking price, and to distinguish calls from puts. This helps to avoid misunderstandings and to classify options properly. A large number of options can exist on a single stock, so the coding system used for trading purposes is very helpful and efficient. After trading options actively, you might memorize these codes; however, it also helps to make a chart and keep it handy for quick reference. Figure summarizes the symbols used for buying and selling listed options. You will need these for entering correct option designations online or, if you trade by telephone, for communication with a broker. [caption id="attachment_12448" align="aligncenter" width="355"] Option trading symbols.[/caption] The expiration month is always expressed first, followed immediately by the striking price. Note that striking prices of 5, 105, and 205 have identical symbols. This works because the market value of the underlying stock quickly determines which range of pricing applies for listed options. The situation for LEAPS options is more complex because price ranges can spread out over a wider range over three years, and symbols also need to distinguish between different years, and not just months. The industry is struggling with the problem of how to reduce LEAPS options to a logical and consistent system of symbols.