Option Chain Technical Details


Posted by: Invos Research
Published on: January 12, 2023
Option Chain Technical Details

An option-chain is a listing of all the options contracts that are available for a particular underlying asset, such as a stock. It typically includes the following technical details:

  1. Strike Price: tells you the price at which the underlying asset can be bought or sold if the option is exercised. It's usually listed in increments of $1 or $5, depending on the underlying asset and the expiration date.
  2. Expiration Date: is the date on which the option contract expires and can no longer be exercised. It's typically listed in monthly or weekly increments and is the last day of trading for that option contract.
  3. Bid and Ask Prices: The bid and ask prices are the highest price a buyer is willing to pay for an option (the bid), and the lowest price a seller is willing to accept (the ask). These prices are determined by supply and demand in the market and can change frequently.
  4. Open Interest: is the total number of pending option contracts that have been bought but not yet sold or exercised. This information is important because it can indicate the level of liquidity and interest in a particular option.
  5. Implied Volatility (IV): Implied volatility is a measure of the expected volatility of the underlying asset's price. It is expressed as a percentage and calculated using the Black-Scholes model.
  6. Greeks: Greeks are the statistical measures used to analyze the risk and potential profitability of an option trade. These include Delta, Gamma, Theta, Vega and Rho that indicate how the option price will change when certain variables change.
  7. Volume: The volume is the number of contracts that have been traded during a specific time period, such as a day or a week. High volume can indicate strong interest in a particular option.

By analyzing these technical details of an option chain, investors can gain a better understanding of the market for a particular option and make more informed decisions on whether to enter or exit a trade. Additionally, by comparing different options within the option chain, you can evaluate the relative value of different options and make decisions about which options to trade.