41 lines
2.1 KiB
Plaintext
41 lines
2.1 KiB
Plaintext
Cl,apter 1: Definitions 23
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OPTION SYMBOLOGY
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It is probably a good idea for an option trader to understand how option symbols are
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created and used, for it may prove to be useful information. If one has a sophisticat
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ed option quoting and pricing system, the quote vendor will usually provide the
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translation between option symbols and their meanings. The free option quote sec
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tion on the CBOE's Web site, www.cboe.com, can be useful for that purpose as well.
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Even with those aids, it is important that an option trader understand the concepts
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surrounding option symbology.
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THE OPTION BASE SYMBOL
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The basic option symbol consists of three parts:
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Option symbol = Base symbol + Expiration month code + Striking price code
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The base symbol is never more than three characters in length. In its simplest form,
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the base symbol is the same as the stock symbol. That works well for stocks with three
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or fewer letters in their symbol, such as General Electric (GE) or IBM (IBM), but
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what about NASDAQ stocks? For NASDAQ stocks, the OCC makes up a three-let
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ter symbol that is used to denote options on the stock. A few examples are:
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Stock
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Cisco
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Microsoft
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Qualcomm
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Stock Symbol
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csco
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MSFT
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QCOM
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Option Base Symbol
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CYQ
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MSQ
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QAQ
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In the three examples, there is a letter "Q" in each of the option base symbols.
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However, that is not always the case. The option base symbol assigned by the OCC
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for a NASDAQ stock may contain any three letters (or, rarely, only two letters).
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THE EXPIRATION MONTH CODE
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The next part of an option symbol is the expiration month code, which is a one-char
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acter symbol. The symbology that has been created actually uses the expiration
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month code for two purposes: (1) to identify the expiration month of the option, and
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(2) to designate whether the option is a call or a put.
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The concept is generally rather simple. For call options, the letter A stands for
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January, B for February, and so forth, up through L for December. For put options,
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the letter M stands for January, N for February, and so forth, up through X for
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December. The letters Y and Z are not used for expiration month codes. |