How to Read and Understand an Options Quote

When you begin trading options you’ll spend part of your research scanning for the right options to buy. When you find a list of options, then you’ll need to learn how to read the quotes to pick the right one.

Quotes on stocks are simple. They involve entering the ticker symbol of the stock into a quote service.

The service returns the latest price at the time of inquiry. Some services offer real-time quotes during market hours while others provide a delay, usually 15 minutes.

Options investors usually start their research with a stock price quote. When the price is displayed, the service will provide a link or tab for options quotes on the stock. Yahoo! Finance provides a link directly under the price of the stock. It is shown as “Options” as its title.

When you click on the options link, a series of items will be shown. The composition of the items may differ in the various service listings. However, they are likely to provide similar items.

What will be presented in most options quotes services are options contracts that are due to expire soon. The listings are referred to as an options chain.

This includes all the available options on the given stocks. When factoring in all the expiration dates, this can be quite extensive.

As mentioned, the default listing contains the contracts that are soon to expire. You have a choice to select other expiration dates, which will change the display of contracts to reflect the date you choose.

Avoiding mistakes

After choosing the date (or leaving the default), choose whether you want prices for calls or puts. Some services will list the calls first, followed by the puts. Others will list them side-by-side. 

It’s important to find the right type of options (call or puts) to avoid making mistakes when trading. It can be confusing for newer traders. It gets easier with practice, though.

Next, decide on the strike prices you’ll want to read. Many investors will focus on the contract prices nearest to the current stock price.

This contract listing will be the at-the-money price. The prices following the at-the-money calls will be the out-of-the-money calls.

For call options, strike prices reflecting in-the-money calls will be listed before the at-the-money calls. For puts, it’s the opposite. The in-the-money puts will follow the at-the-money puts. The prices before the at-the-money puts will be the out-of-the-money puts.

After pinpointing the desired contract, you’ll be shown a bid, ask, and last price, similar to stock quotes. The last price reflects the premium that investors paid for that contract.

That price is not necessarily what you will pay when you place an order to buy. It displays the price of the most recently traded contract for that strike price.

You can usually get a rough indication of what you may pay by taking the midpoint of the bid and ask. However, during fast-moving markets, this method is likely to steer you wrong.

When considering the price, remember that most options contracts are standardized for 100 shares of an underlying stock. Therefore, to get the actual cost (not including commissions), multiply the premiums listed in the options quotes by 100. 

Other considerations

Some quotes services will provide a seemingly cryptic symbol for options contracts. However, you can easily recognize the pattern. This quote format is a recent change and reflects most of the information contained in the options contract line items.

It starts with the stock ticker symbol. Next, the expiration date is given (YYMMDD). Then, a letter is displayed showing whether the contract is a call or put (‘C’ or ‘P’). The strike price is next.

Most investors won’t need to decipher the contract symbol as the information needed is displayed, as described in this article. Active traders may find it useful to use this quoting schema to implement automated trading systems. That concept is beyond the scope of this article.

For many quote services, you’ll likely see open interest and volume indicators. These can help you determine the demand for individual contracts.

Best Deal for Social Security: Retire at 62, 67 or 70?

What's the best age to start taking Social Security? This is a very good question!You have the option to take retirement benefits as early as age 62. However, s0-called "full"

Bad Advice Could Cost You More Than $5,000 a Year in Lost Retirement Benefits: Report

As many as 9,224 widows and widowers aged 70 and up have been underpaid beneficiary benefits for years — at a cost to them of nearly $132 million in lost

10 Ways to Live Frugally Without Looking Cheap

There is no way around it, we live in a status-driven society. Whether that is owning the newest Gucci purse or buying a shiny new car, people judge other people

Opinion: Never Let a Robot Choose Your Investments

We live in a fast-paced world. This motivates many people to automate menial tasks, including investing. That may work for a while, which gives you a false sense of security.

3 Dangerous Things to Avoid If You Inherit Money

Are you due to gain an inheritance anytime soon? Maybe you should not start celebrating or counting that inheritance money before it is in your hands. While gaining an inheritance

Nasty Diseases You Can Get from Your Pets, and How to Prevent Them

We all love to give our pets lots of kisses and cuddles, but what if you end up with a nasty parasite or viral infection? Animals are unfortunately prone to

4 Red Flag Warnings of a Bad Stock Investment

When looking to buy a company that you want to add to your portfolio, there are several things to look for. There are also several things to beware. I believe

What Does the Executor of a Will Do?

The executor is the designated representative who is supposed to ensure that the estate is properly settled and that the assets are distributed according to the wishes of the deceased.

4 Killer Diseases That Can Be Treated with Cayenne Pepper

Did you know that there is one natural remedy that can protect against every leading cause of death in Western countries? It’s time for a new go-to remedy to join

3 Simple Money-Making Rules for Stock Investors

There are lots of different ways to invest and so many companies to choose from. It can become overwhelming, especially for a new investor.  If you are new to investing

4 Reasons to Reconsider Retiring to Florida

So, when one thinks of a place to live out retirement, what state comes to mind? Florida. The state of Florida is the common answer to living out retirement if

35 Benefits of Active Mindfulness

The stress of trying to have it all can leave us feeling like we have nothing at all. If we just take a step back to smell the roses, our