You may have noticed some big changes to your favorite financial Web sites and trading platforms in recent weeks if you’ve been readng options trading articles. It’s been in an effort to get ready for a radical update coming to the options market soon that will affect every option on the board.

When the Options Symbology Initiative takes effect on Feb. 12, all option tickers will become 21 characters long.

With the addition of more and more optionable stocks over the past few years, the vast number of varying expiration dates (now there are quarterly and monthly expiration options), and mind-numbing possibilities for strike prices (especially with so many options trading at one-point strikes), the Options Clearing Corporation is finally making things simpler.

That’s right, changing an equity option’s symbol from they typical three to five characters to 21 should make it easier to decipher the option code. They will look more complex, but they’re really much simpler once you get used to them.

Let’s look at a few examples so you’re ready for the switch.

Current Options Symbols

For more than 25 years, equity options have been reported using a series of three to five characters. The sometimes complex system is actually fairly amazing when you figure out how much information is represented by those few little characters.

The first one to three characters, referred to as the “option root,” identifies the underlying stock.

In many cases, the underlying is easy to figure out when the stock has a ticker symbol with three or fewer characters. For instance, IBM, JNJ and MRK are easily identified as well-known companies IBM, Johnson & Johnson and Merck.

Things get a little trickier, though, when you start looking at options on Nasdaq-traded securities that have more than three characters. That’s because the current methodology allows for no more than three symbols to identify the underlying stock. Thus, companies such as Microsoft (MSFT) and Cisco (CSCO) are now represented by the three-character options roots INQ and CYQ, respectively.

The last two characters of any current option symbol represent the date that the option expires and the strike price of the option.

The first tells us when the option expires — A-L for January through December calls and M-X corresponding to January through December puts.

Finally, we have the most complex piece of the option symbol code, the last letter, which tells us the option’s strike price.

Think about it, there are only 26 letters to cover the myriad of available potential strike prices. For example, “A” can represent the 19 strike for Cisco and the 600 strike for Google (GOOG). That can create confusion. Lots of confusion.

Now let’s look at how the new option symbols will help to clear up some of that confusion.

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New Option Tickers

Under the current methodology, the Intel July 20 Call is represented by the symbol “NQGD” as follows:

Root symbol	Expiration date and call/put indicator	Strike price
NQ	G	D

Staring on Feb. 12, this option symbol becomes INTC  100716C00020000. [Editor’s note: There are two spaces following INTC.]

Here’s the breakdown of the new symbol parts:

1	2			3	4
Underlying security (root symbol)	Expiration year	Expiration month	Expiration day	Call/Put indicator	Strike price (dollars)	Strike price (decimals)
INTC	10	07	16	C	00020	000

The stock’s underlying ticker symbol will always be used in the new symbol. In this example, “NQ” becomes “INTC,” the actual stock ticker symbol for Intel. No more decoding option roots.

The first six places of the option symbol will always be used for the underlying’s ticker symbol. Spaces are added for anything less than six characters.

In our example, INTC is followed by two spaces. For a company such as Ford (F), five spaces would be inserted.

The second element, the expiration date, is always six characters. In this case, “100716” represents July 16, 2010, the expiration date for July 2010 options. No more having to guess (or look up) when an option will expire.

The third element is the call or put indicator, denoted appropriately by a “C” or “P.” Simple, no?

The fourth and last element is the strike price, which consists of eight characters. The first five denote the strike dollar price, and the remaining three represent the decimal (if any).

Thus, “00020000” represents the 20 strike. The 20.50 strike would be “00020500.”

Clearly, this new process is a radical change and will take some getting used to. But it seems to make sense. And when it comes to option symbols, common sense is something we sorely need.