Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 275

Underlying Interest - The stock (or index) that the option is based on.
Type - This could be call or put. We will cover this shortly. Exercise Price - Also known as the strike price, this is the specified price at which the underlying stock can be bought (or sold) at prior to the option expiration date.
Expiration Date - This is the last day the option can be exercised. Most standardized options expire on the Saturday following the third Friday of their expiration month. But since brokerages and exchanges are closed on Saturdays, the third Friday of the month becomes the actual deadline to exercise that month's options. If left unexercised by then, the options simply expire and become worthless. (That Saturday actually becomes the settlement day for options traded or exercised on Friday.)

For simplicity, standardized options are referred to as just options, and we will also follow this convention. When you look up a quote for a certain option there are several specifications to consider. Among them are:

Option Symbol - Just like stocks, options also have symbols associated with them. The symbol is normally a combination of the stock symbol (or abbreviation thereof), a certain code for their expiration month (e.g., A or M for January call or put, B or N for February call or put, and so on), and a certain code for their strike price (e.g. A for $5, $105, $205, $305, etc., O for $75, $175, $275, etc., and so on). For example, if GE stock is currently trading at $50, GEAO signifies a General Electric call option expiring in January with a strike price of $75. There are always exceptions to this rule however. For example, for a highly volatile stock which may swing more than $100 in a given period new codes are added to handle the $100 boundaries as well to distinguish strike prices of, for example, $50, $150, and $250.

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Copyright and Disclaimer
Book Chapters
Table of Contents Copyright and Disclaimer Foreword Money
Bonds Futures Stocks Options
Mutual Funds Retirement Final Words Appendix A

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