Learn How to Read Option Chain: Benefits and Prospects

how to read option chain

Options chain is a listing of all the option contracts. Both put and calls of a particular contract are included. Most of you search how to read option chain.

Here, I want you to focus on the put and call elements.

The call option allows you to buy a particular stock. However, the put option is used when selling a stock. 

But there are other elements as well. These are strike price, expiry date, and color coding. 

 There are many benefits of understanding how options chains work. Firstly, it helps you to understand all options to any underlying asset. I feel that you must know how to read option chains to make informed stock trading decisions.  

You will then find it easier to extract essential insights and track the probable future movements of stocks. 

Experts also say that knowledge of option chains helps you evaluate the depth and liquidity of any option contract. 

Finding Options Information

Finding Options Information

It is vital to track information about individual options. For instance, you can see the strike data in the middle. All information related to calls and puts on the same price are mentioned adjacently. 

Real-time Options Chains on Financial Websites

You can access any vital website to gain knowledge of real-time options. These options are also listed in relation to the related stock prices and other details. I will recommend the following sites to learn about real-time option chains:

  • Yahoo Finance 
  • Charles Schwab’s website
  • WSJ 
  • Other registered or FINRA-recommended sites

 You can easily access and review the options prices from the stock price charts. Moreover, these charts tell you about the current trends of specific options. 

If you are a trader, then stock charts are an excellent data source for you. You can easily see the highs, lows, and even the “chops” from the chart. 

If you read all the details on the chart, you can quickly know how to read the option chain. At least the basics. 

What An Options Chain Tells You?

What An Options Chain Tells You

Options chains give you some stock data. This data is helpful when making trading decisions. 

Derivation Of Options Value from Underlying Securities

As I said, you can do a good trend analysis from the Options chain. If you don’t know how to read an option chain, learn that first. 

After that, you can anticipate the dates when you will get the best value of a stock. Accordingly, you can also fathom the best date to buy and sell the stock. 

When you can do that, you’ve learned how to read option chain. 

You must agree on a date when you will sell or buy an asset at an agreed price. At the same time, the price of the future contract can be derived from the underlying asset price. 

Distinction Between Calls and Puts

Calls and puts are basically indicators to buy or sell a stock. 

Definition Of Call Options

There are mainly two options. When you read how to read option chain, you will come across these two. 

The call option gives you the right to buy the underlying option at a given price on a given date. 

Definition Of Put Options

The opposite of call is the put option. Put means to ward off or sell an option. But you must again specify the projected price and date of sale. 

Expiration Dates and Their Impact on Options Value

There are expiration dates of any stock. For instance, you buy the call option for any stock that expires in June. This stock has only 30 days to expire, so its value will depreciate immediately. You get such info from the expiration date of the stock. 

Order Of Columns in An Options Chain

The order of columns within the options chain is for your convenience. You need to consult all the parameters in descending order. There are individual symbols for each option. 

However, the symbol for option contracts of the same stock would be different, with a different expiration date. You should note these differences. It will give you a clear idea of the contract’s expiration date. The general order of columns is:

    – Strike price

    – Symbol

    – Last price

    – Change in price

    – Bid price

    – Ask price

    – Volume

    – Open interest

Understanding Calls and Puts

Understanding Calls and Puts

When you buy any options contract, you get the right to buy or sell it. However, that should only happen at a stipulated date and fixed rate. But you need concrete knowledge of how to read an options chain.

Clicking the “buy” option does not fix your date and price. You can negotiate that yourself. 

You sell it on the due date. Or you may sell it any time before then, too. 

Americans have decently traded 39 million option contracts on average in 2021. CNBC shows that the rate increased by 35% on a YoY basis. 

However, NASDAQ data shows that only 7% of Americans sell the option contract on the last expiry date. 

You need to click the call or put option to get the option and authorization to buy or sell the stock. 

Call Options:

The call option is there for you to request to buy an option contract. Now you know how to read an options chain. That means you also know you must buy it within the stipulated date and price. 

However, there are some additional clauses too. But most importantly, one call option gives you the right to buy 100 shares at a specific price

Put Options:

You already know that the put option confers the right to sell the stock at a given rate and within a fixed time. 

However, the put value or the stock value at the time of sale will increase when the value of your underlying stock decreases. 

Right To Sell 100 Shares at A Specific Price

Like the call option, the put option also gives you the right to sell 100 shares simultaneously and at a fixed price. The FINRA decides this bracket. No investor or brokerage firm can alter this value. 

You will know more similar regulations when you learn how to read an options chain.

Impact Of Strike Prices on Option Prices

You learned about strike price while searching how to read the options chain. However, you should also know its impact on option prices. 

The strike price decides the intrinsic value of any stock. 

The premium of any option grows as the monetary value of the option also grows. However, it decreases when the option starts losing its economic value. 

To calculate the premium, please add the stock’s intrinsic value with the time value. 

I have already discussed the situations responsible for an increase or decrease in a stock’s contract’s value (price). 

Execution Of Options Based on Market Price Crossing the Strike Price

 Regarding options trading, the market price must be more than the stock price. Only then can you execute the option. For instance, consider a stock’s current trading price of $30 for each share. Then, you can purchase the call option for $45. However, that option would not be worth the same if the market price wasn’t $45. 


This article explains how to read option chains in depth. 

The options chain is a practical decision-making guide for traders and investors. It helps them to understand the best options available to them for buying a specific asset. 

As I explained above, you must look for the strike price, expiration date, and other details,  To understand how to read an options chain, you must know the basics- call and put. Call permits you to buy the stock. On the other hand, put ensures that you can sell the stock. The final price of the option is the premium. Read my full article to learn how to calculate it.

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Simple Tips To Diversify Your Stock Portfolio

Simple Tips To Diversify Your Stock Portfolio

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Invest In Stocks With Different Market Cap Once you’ve allocated a good portion of your money into stable stocks, you can then toy around with high-risk and high-growth ones. A good way to tell these stocks apart is by looking at their market capitalization. Market capitalization refers to the current stock value of a company multiplied by the number of present shares in the market. Using that formula, stocks can be divided into three categories: large-cap stocks, small-caps and mid-caps. A large-cap stock is typically valued above $10 billion. Well-established and reputable companies make up this category. Mid-cap stocks are companies between $2 billion to $10 billion, while small-cap stocks are valued below $2 billion. The lower the company’s market cap, the more volatile they are considered. That said, small-cap companies tend to hold characteristics that make them more likely to yield significant returns. This is especially true if they’re a newer company with fast growth potential. If you want to diversify your stock portfolio, be sure to pick stocks in all three categories. This way, you can get a good, eclectic mix of investments that can experience both growth and stability. Diversify With International Stocks It’s not uncommon for major shifts in one country’s geopolitical and economic situation to greatly affect the public stocks of companies based in that country. This can impact businesses of all sizes, regardless of the industry. For instance, the Russian-Ukranian war has led to reduced spending and investment in both American and Russia-based companies. This is due to sanctions, investor uncertainty, reduced spending capacity, and a whole lot of other external factors. While the stock movements of most countries have ties with one another, only a few would bear most of the brunt. 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Index funds are market indices that include a wide range of stocks that follow a broad market segment. Examples of index funds include the S&P 500 in the US and ASX 200 in Australia. Investing in these funds means you’re essentially putting money in all the stocks covered by the fund itself. This makes them a more efficient option for investors who want to invest in multiple stocks but don’t want to be the primary selectors of these stocks. This investment option is an excellent choice for both novice and experienced investors, offering a good balance of growth and stability by reflecting the market’s movements in a parallel fashion. That said, if the market is underperforming, you’re also risking losing a fraction of your investment’s value—so be strategic with your decision. Invest In Multiple Sectors Industries often experience different stages of growth and decline. 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What Is Stockinvest? Is It Legit And Working In 2024?

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Learning The Basics of Stock Trading: Best Sources and Options to Consider

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It covers: The nuances of technical analysis The right mindset for beginners in the stock market Practical strategies that traders can directly use Technical Analysis of the Financial Markets by John Murphy To make quick profits from the market, you need to analyze the stock chart precisely.  Technical analysis is the technique used to monitor stock charts. There is no better book than this to learn technical analysis.  Before you start digging into the book, learn what technical analysis is. Read the article "Technical analysis vs fundamental analysis: what's the best way to analyze stocks?" for clarity about technical analysis.  Winning on Wall Street by Martin Zweig This book takes you through the investing strategies that Martin Zweig personally followed. Are you still wondering how to learn stock trading? Then this book is the best for you. 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private equity vs venture capital

Private Equity Vs. Venture Capital: Key Differences

Private equity vs Venture capital - In most cases, people get confused about these two terms and want to know the differences between them. In some cases, they are even used interchangeably. But you must understand beforehand that these two terms do not refer to the same thing. However, in both cases, the terms refer to firms that invest in private companies and keep equity in exchange. In this article, you will learn in general about private equity and venture capital. Furthermore, we will also discuss the major differences between the two terms. Finally, we will share with you some of the important details regarding private equity and venture capital. Hence, to learn in detail about both these terms, read on through to the end of the article. Private Equity Vs Venture Capital - Definitions According to Investopedia, “Private equity is sometimes confused with venture capital because both refer to firms that invest in companies and exit by selling their investments in equity financing, for example, by holding initial public offerings (IPOs). However, there are significant differences in the way firms involved in the two types of funding conduct business.” Both private equity and venture capital make investments in companies of different types and varied sizes. As they do so, they commit different sums of money and claim different equity percentages in the companies in which they are making investments. Before we learn the differences between private equity and venture capital, it is essential to understand the definitions of the two terms. Read More: Business Venture Definition, Types, And How To Start? Private Equity Private equity refers to a group of investors that make direct investments in a company. These types of investors mainly focus on investing in mature companies (and shy away from startups). The company should not be in its initial growth stage. These investors provide funds to businesses that are in distress. These types of investors also buy a distressed business, improve its operations in the marketplace, and then sell the business to make a profit. The major goal of the private equity investor is to increase the worth of a particular company so that the company generates a better return on investment than the private equity made. Venture Capital Venture capitalists are behind the running and functioning of a venture capital firm. Venture capital is also a form of private equity, but there is a difference. A typical private equity firm prefers to invest in stable companies, while venture capital invests in risky startups that have immense growth potential. Basically, all venture capital firms are private equity firms, while all private equity firms are not venture capital. Venture capitalists provide venture capital to mostly small companies. To ensure that there is a good return on investment, venture capitalists unusually get involved in the decision-making of the business. Private Equity Vs Venture Capital - Major Differences According to Wall Street Mojo, “Both private equity and venture capital make their investments in the companies. However, in the case of private equity, investment is generally made in the companies in their mature stage of working. In contrast, in the case of venture capital, investment is made in the companies in their early stage of working.” Before you understand the major differences between private equity and venture capital, it is important for you to understand that both these types of companies make money after exiting. That is, both of them make profits after selling their investments. However, both of them follow different methods of doing so. The first difference is that private equity firms invest in and buy public companies that are in their mature stage, while venture capital invests in early-stage companies and startups.  While private equity firms invest across all industries, venture capital mainly focuses on technology, cleantech, and biotech, that is the ones that have future returns. In most cases, private equity firms buy 100% of a company in LBO, while venture capital buys only a minority part of a company. However, it can be up to fifty percent. Since private equity firms buy mature companies, their investments are large, ranging from $100 million to $10 billion. On the other hand, since venture capital firms deal with smaller companies, their investments are mostly up to $10 million. To generate capital for investments, private equity firms combine equity and debt, while venture capital firms only make use of equity to make an investment. Few Things To Consider For Private Equity And Venture Capital According to, “One of the advantages of bringing on a private equity investor is that you’ll have access to more than just cash— you’ll also get that person’s expertise. If they have experience within your industry, a private equity investor may help you find opportunities for improvement.” However, private equity firms get to say how a business is run, as they take a majority stake in the company they are investing in. In some cases, they even have the power to make calls for changing executives. If they think it is the right move, only then do they consider selling the company to make profits with equity. When a venture capital firm funds a company, it is really very helpful for the latter since they are not mature enough to make great returns. Furthermore, venture capital firms also share their knowledge and expertise in the decision-making process, which helps in minimizing unnecessary risks and mistakes startups make initially. Venture capital firms also come with various experienced connections, which help the new companies a lot. Read More: Difference Between Entrepreneur And Entrepreneurship With Examples Final Thoughts Hope you have found enough information regarding private equity vs venture capital. You can understand from this article that private equity is what an investment firm invests in a company or other entity that is not publicly listed or traded. While venture capital is a firm that funds startups and other young businesses that have good growth potential. Both private equity and venture capital buy companies of different types and sizes, claim different equity amounts and invest different amounts of money. Do you have any further information to add regarding the differences between these two terms? Share your views with us in the comments section below. Read Also: What Is Social Entrepreneurship? – Steps To Become A Successful Social Entrepreneur Business Entrepreneurship  – What Should You Know Before You Start A Business? How To Become An Entrepreneur? – Steps To Follow