39 lines
2.1 KiB
Plaintext
39 lines
2.1 KiB
Plaintext
Chapter 1: Definitions
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Option Description
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IBM January 125 call (expiring in 2001)
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IBM January 125 call (expiring in 2002)
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IBM January 125 call (expiring in 2003)
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IBM January 125 put (expiring in 2003)
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27
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Option Symbol
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IBMAE
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VBMAE
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WBMAE
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WBMME
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Note that the last line shows a LEAPS put option symbol. The letter M stands for a
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January put option - the standard usage for the expiration month code.
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STOCK SPLITS
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Stock splits often wreak havoc on option symbols, as the exchanges are forced to use
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the standard characters in nonstandard ways in order to accommodate all the addi
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tional strikes that are created when a stock splits. The actual discussion of stock splits
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and the resultant option symbology is deferred to the next section.
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SYMBOLOGY SUMMARY
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The exchanges do a good job of making symbol information available. Each exchange
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has a Web site where memos detailing the changes required by LEAPS, wraps, and
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splits are available for viewing.
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The OCC and the exchanges have been forced to create multiple option base
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symbols for a single stock in order to accommodate the various strike price and expi
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ration month situations - to avoid duplication of the standardized character used for
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the strike or expiration month. This is unwieldy and confusing for option traders and
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for data vendors as well. In some rare cases, mistakes are made, and there can briefly
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be two designations for the same option symbol. The only way to eliminate this con
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fusion would be to use a longer, more descriptive option symbol that included the
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expiration year and the striking price as numerical values, much as is done with
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futures options. It is the member firms themselves and some of the quote vendors
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who object to the transformation to this less confusing system, because they would
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have to recode their software and alter their databases.
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DETAILS OF OPTION TRADING
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The facts that the strategist should be concerned with are included in this section.
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They are not presented in any particular order of importance, and this list is not nec
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essarily complete. Many more details are given in the discussion of specific strategies
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throughout this text. |