Usually, when you look at options, there’s gonna be this table like this.
Options Table
In general, a put allows you to put that stock to someone else. So let’s say the stock tanks, you could put it to someone else. That’s if you’re a buyer of puts.
If you’re a buyer of calls, it allows you to get that stock at a lower price. So let’s say you get a call at 130 dollars and a stock explodes to 180 dollars
Well if you have that stock at 130, that means you have the right to get that stock at 130 dollars. That’s your contract, that’s your coupon code and that’s what you’re capable of.
There’s 4 parts of the trade: a buyer and a seller of the calls or a buyer and seller of the put. So it really just comes down to where you want to be.
For our example, we’re just going to take a look at buying, because that’s the easiest approach. Normally, when you’re looking at the call side or the put side, you’ll have dates and strike prices. So you might have, let’s say, stocks going at $200.
This is kind of the middle strike price. This is where you want to trade at. So for example you want to be owning that stock at $200 or I want protection of that stock at $200.
These are your strike prices.
Current price is $200, you have in the money, out of the money and at the money.
What does that really mean?
Out of the Money
Out of the money means there’s no like big value to it. The price hasn’t hit there. So if you’re dealing with calls, if the stock price is already like at $200 and you got it at $180. You got a coupon code. That means you can actually use it and it’s worth something
If you have a coupon code at $220, well it’s not really worth anything. It’s not like real. It does have time value and other things be attached to it. But it doesn’t have that stock value.
On the put side, what you have is a similar concept out of the money. That stocks not below 180, right?
Let’s say you have a put at $190, I can put that stock to someone at $190. But it’s not at 190 or lower it’s at 200.
They’re worth anything but you bought some protection a while back when that stock was at let’s say $330. You bought a put at 220 and now it’s at 200.
Well, if that stocks at $200 this is in the money so it’s worth something. Now all of a sudden, you could put it to someone at $220.
The puts allows you to put something to someone else that calls allow you to buy that stock at a lower price. We’re looking at kind of about one month timeframe here. This could be or make it a little bit bigger for you this might be.
So they have different days and you could say hey well I want to get a foot or a call 20 days out or 50 days out or 100 days out.
That’s how it works on the basic sense. Let’s check this out here on the trade panel.
Here’s the basic option or the basic quote.
The ticker symbol.
Here’s all your prices.
The current price we know is at $145. These are all the options chains stuff.
Here’s the days remaining.
If you want to go 800 days out, you could do that with the January 21st of the year 2022. It’s more expensive if you go further out in time but you could go that far if you want. Again, if you buy more time premium, a longer coupon, it’s gonna cost you more. What you’re doing here is let’s say I want to open up this 184 days to go.
You’ll see here is those strike prices and that expiration date. Now here, we have our calls.
Here we have our puts.
So if I open it up let’s say 10 strike prices. Now what I can see is this highlighting effect here and it’s a little bit purple on this trade panel. These are all in the money (yellow).
These are out of the money (orange).
The purple is actually you know it’s it’s more worthwhile because you can do something with the stock itself . Now if you’re looking to choose a contract, I could get it out at $165.
I want to get a $165. I’m okay with owning the stock if it goes above $165.
Why would you do that? I think we might have a pullback but if we actually do start heading higher, I’m okay to own it at $165. You could go ahead and get a contract there.
Most people they just deal with the contracts. They don’t usually get the stock itself.
What happens is this contract becomes more valuable because now you could sell that contract to someone else who actually wants the stock.
You just sell that contract for a little bit more money and then you just capitalize on the difference.
It’s like buying a phone for $200 and selling it for $220 because all of a sudden it becomes more rare.
So here you buy this contract for $375 and if it does go up in price, you could cash out with about $500 in profit if that happened right away. Otherwise you do lose some premium every day.
That’s that theta decay right here.
Negative two dollars a day for just holding that contract because you’re a buyer.
Of course, you could be a seller of this contract. If you’re interested in puts, it’s no different. Let’s say you’re interested in getting a put at $140 because you have a stock.
If you got stock and you’re worried about a big down move, well current stock price is $145 and you’ve made some money on it. You could protect that stock at 140 and right-click buy that.
If I want but 184 days out, I’m worried about the next six months or so. So I could buy the protection at $135 and it’ll cost me less.
Now most people do this when they have stock. Here are are the stock price.
So here’s our 140 level, stock goes up you make money.
As we go down, we lose money. What you can do is protect that stock.
Well I got 5 contracts because I have 500 shares. One contract protects 100 shares. So what I would do is, add this in and all of a sudden it flattens my curve on the downside.
If it goes to zero, my loss would only be let’s say 10,515 dollars. Still sounds like a lot.
But without it, at 50 dollars, I would be down almost 48,000 dollars.
Remember, 500 shares of Caterpillar right now is pretty costly– 145 dollars per share.
That’s really the point — the puts is to protect yourself. You could go a little tighter and go 135 and then lose a little less. But it wouldn’t be a ton more if that’s not continues to take. Because if you still believe in the stock, you just want to protect them in downward move.
That’s how you read a basic options table.
There’s also different kinds of things here on the columns. Now I have probability in the money and open interest.
You could go ahead and change it to you volume, option codes, Delta and many more. You could modify these how you want. You could open up the strike prices to, let’s say 900, and see all the strike prices.
Anyways, that’s the basics. There’s also some more advanced stuff too looking at some filters. What you could do is create a filter.
There’s some filters days to expiration. You could also change to spreads like calendar spread.
So anyways, that’s the basics behind this options table. There’s not much more you need to really know about it on the basic side. The more you use it, you’ll you’ll get more familiar with it.
You’ll see there’s other things like statistics and that kind of stuff. Sometimes I’ll glance over those things but probably you’ll just kind of hang out in in these contracts as you get more familiar with them.
You’ll tweak it based on your personal needs.
