Understanding Stock Option Abbreviations, Part 1
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). The terms, remember, must all be present to distinguish one option from another. In the following example, the single expression gives you the underlying stock, expiration month, striking price, type of option, and current premium. The Wal-Mart call expiring in September with a striking price of $60 per share currently is valued at 1.25 (premium is $125):
Wal-Mart SEP 60 Call at 1.25
When 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.
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.
Example: Abbreviated Form: You want to trade in calls with September expiration and 60 striking price. The symbols to use are I for the month (September is the ninth month and I is the ninth letter); and L for the striking price. In this case, a call would have the designation IL and a September 60 put would be coded as UL.
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