A:

The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, the expiration month and the strike price. An option ticker is quoted by a series of letters. This is a lot of information crammed into one ticker, but we can help you decode option ticker symbols.

Option Ticker Structure
An option ticker can be broken down into three parts. The first part of the option ticker is the option symbol, which can vary in letter length. Typically, this symbol will be found on all the options of the company and will be identical to the stock symbol. However, this is not an absolute. For example, Microsoft's ticker is MSFT, while its option symbol is quoted as both MSQ and MFQ. The second part of the option ticker is the expiration date and the call or put classification of the option, and it consists of a single letter. There are 12 possible expiration periods for options - one per month. Options classified from A to L are call options and M to X are put options. The third part to the option ticker is the strike price of the option, and this is also a single letter. Because there is a wide range of potential strike prices and a limited number of letters, each letter represents more than one strike price. This creates the need for a bit of guesswork, but nothing overly complex.

Here is a visual breakdown of an Oct. 05 35.00 Merck Option:

optionticker1.gif

To help you decode any option ticker, we are providing you with a code sheet:

Now that you have your option ticker code breaker, let's try an example:

GMIU - The last two letters provide information pertaining to the terms of the contract. This leaves the other two letters as the option symbol (GM). Again, the second part of the ticker (I) explains the month of expiry and whether it is a call or a put. Looking at the above chart, we see that this is a call option that expires in September. The third part (U) is a bit trickier: if we know that this is a General Motors option and the current stock price is $31.50, we can easily find that the strike price of this option is $37.50. By looking at the option ticker, we now know that it is a Sept. 37.50 GM call option.

When it comes to the strike price, it is important to remember that strike prices for most options do not vary a great deal from the current stock price. For example, it is rare that you would be able to purchase an option with a strike price of $500 that has a stock price of only $15.

Be warned that in the event of stock restructurings, like five for seven stock splits or mergers, there may be no way to use the codes above to find out information about the option. If such a restructuring occurs, the exchange on which the option is traded will change the option ticker symbol accordingly.

For further reading, see our Option Basics Tutorial.

RELATED FAQS

  1. How does a forward contract differ from a call option?

    Find out more about forward contracts, call options, the mechanics of these financial instruments and the difference between ...
  2. What are the main risks associated with trading derivatives?

    Understand derivatives trading and learn about the primary risks usually associated with trading in the derivatives market, ...
  3. How can an investor profit from a fall in the utilities sector?

    Learn how an investor can profit from a fall in the utilities sector by employing speculation methods such as short selling ...
  4. What is the difference between derivatives and options?

    Learn how options are one type of derivative and how equity options derive their value from a stock, and understand other ...
RELATED TERMS
  1. Strike Width

    The difference between the strike price of an option and the ...
  2. Inverse Transaction

    A transaction that can cancel out a forward contract that has ...
  3. Reference Equity

    The underlying equity that an investor is seeking price movement ...
  4. Boundary Conditions

    The maximum and minimum values used to indicate where the price ...
  5. Delta-Gamma Hedging

    An options hedging strategy that combines a delta hedge and a ...
  6. Gamma Hedging

    An options hedging strategy designed to reduce or eliminate the ...

You May Also Like

Related Articles
  1. Options & Futures

    How does a forward contract differ from ...

  2. Options & Futures

    Tesla Stock Too Expensive? Trade Tesla ...

  3. Options & Futures

    Stock Options To Trade On Intraday Momentum ...

  4. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without ...

  5. Active Trading Fundamentals

    How To Short Amazon Stock

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!