Chapter 17: Call Chain

We have briefly gone over what a call option is, but let’s make it a little clearer. When you buy a call option, you are betting that a stock will go up. Here are three important components that affect the price of an option.

Strike Price= the price at which you are allowed to buy (call) or sell (put) the stock

Term= The time remaining before the option expires

Current Stock Price of the underlying asset (stock)

This is all a lot of information about options, but what do they look like on a trading screen? Let’s find out!


Trading screen for Facebook (FB). Instead of looking at the underlying (stock), we are now going to focus on the option chain. There are so many different categories to choose from (MAY 14, MAY4 14, MAY5 14, JUN1 14, etc.) so how do we know which one to choose. Since we are options beginners right now, we are going to trade options that are approximately a month from expiration. We can tell how close the option chain is to expiration by looking at the number in parentheses. The MAY 14 Weeklys expire in two days, while the JUN 14’s expire in 37 days. The JUN 14’s seem to be the most appropriate option chain considering our rule about expiration. Let’s click the blue arrow next to that chain and see what happens.


Wow! Those numbers look scary at first since there are so many of them. But let’s take this one step at a time to find out what this screen is really telling us. What do we know so far? We know that this screen is showing an option chain for FB for the month of June. All of the other chains are still on the screen, this is just the only one expanded right now. Right below the JUN 14 chain, there are four categories, Last X, Net Chng, Bid X, and Ask X. And above those four categories is the call bar! This is telling us that we are looking at the call side of the June FB options rather than the put side (which is located on the other side of the screen.) Here’s a brief explanation of the four categories:

Last X: This is the last traded price of the option at that current strike price

Net Chng: This is difference in the price option from the previous day

Bid X: The “bid” price is the latest price offered by a market maker to buy a particular option

Ask X: The “ask” price is the latest price offered buy a market maker to sell a particular option

There are still a few more very important things to learn about option chains. If you look to the middle of the screen, you will see JUN 14 four times in column. If you look directly to the right of each JUN 14, you will see a number starting with 55 and ending with 62.5. If you guessed that these numbers were the strike prices you are catching on quickly! If not, no worries. We will practice reading option chains plenty. If we look to the top of the screen, we can see that FB is currently trading at 60.05 For a call option, when the option’s strike price is below the market price of the underlying asset it is considered in the money. If the strike price is above the market price it is considered out of the money.

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