Far from being some flash-in-the-pan investment strategy du jour, listed options have only gotten more popular during the past four decades that they’ve been in existence. (They turn 40 years old in 2013.) Since then, options trading information has become more important than ever.
A lot has changed since they debuted – initially, only call options were available to trade. (Puts didn’t come along until four years later.)
And what was once a tool only for institutional investors and the very wealthy has become universally accessible.
As options trading volume breaks new records every year – thanks to more securities becoming option-able, and more investors entering the playing field – the original system that was put in place needed to grow to fit demand.
One thing that’s changed in recent years is the way options tickers appear. Instead of being anywhere from three to five characters, you’ll see a combination of 21 letters and numbers. The new naming convention makes a lot more sense than the old way, which seemed to have more exceptions to the rules than rules themselves.
Back “in the day,” an option ticker contained a root symbol – either the stock ticker or some variation thereof. (An easy example would be “C” for Citigroup.) Then the next character represented the expiration month, and the final character represented the strike price.
The final letter is where things got really tricky. For example, the letter N could mean that the option strike was $70, $170, $270 or $370.
And what if there was a stock split or the stock price changed so dramatically that the strike prices were no longer valid? (Remember when Citigroup (NYSE: C) traded for $55, and not its current $5 price?)
So, a Citigroup May 70 Call would have had a ticker of CEN. (The E represents a May call option. But you had to be careful if you told your broker to buy CEN for you, as it’s also the ticker for Contact Energy in New Zealand.
These days, while there’s no such thing as a call option at $70 for Citigroup (and there won’t be unless the stock finds its way back up above $55 again), you can still buy options on this stock.
It’s rare for a stock under $5 to have options traded on it. But if you wanted to buy calls (or puts) on Citi, you still can though the strike would most likely be at $5. So, say you wanted to buy a Citigroup May 5 Call. The ticker looks kind of scary at first, but you’ll soon see why it makes a lot of sense:
@C 110522C00005000
Now, the good news is that your broker understands what this means, and if you tell him to buy five contracts of the Citi May 5 Calls, that’s probably all you need to do.
But it wouldn’t hurt to understand what you’re looking at so that you pick the right option, regardless of the ticker.
You might notice that this ticker has fewer than the 21 characters we mentioned that you should be on the lookout for. Note the spaces between the stock symbol (C) and the remainder of the ticker. This allows plenty of room for the whole stock ticker, which is great for the Nintendos of the world (PINK: NTDOY), that would not have to be truncated because option tickers are no longer limited to five characters.
Let’s unravel the mystery of the numbers next.
110522C00005000 — the 11 is the expiration year (2011)
110522C00005000 – the 05 is the expiration month (May)
110522C00005000 – the 22 is the expiration day (the Saturday after the third Friday of the expiration month)
110522C00005000 – the C is for “call” (it would be “P” for put)
110522C00005000 – these five digits indicate the strike price in dollars ($5)
110522C00005000 – these final digits represent the strike price in cents. Strike prices occur in $2.50 increments under $25. If this were a $7.50 call, this final set of numbers would be 500.
The good news is it’s not necessary for you to memorize this naming convention. Your broker is well-versed in how to place your option trades. That should free you up to spend more time on choosing your trades so that you can not only make them with confidence, but also manage them and know that what you see on your brokerage statement is exactly what you picked.
Further, you can quickly track the daily prices on your option by going to popular finance Web sites like MarketWatch, Google Finance, Yahoo Finance and others. Go to the page for your stock at these sites and you will find a button for the “option chain,” that lists the months, strike prices, bids, offers and last sales.
