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What is options trading - Options trading examples

What is options trading - Options trading examples

In the article entitled What is options trading?, we have given a quick overview of the most important notions for an options trader. Here, we seek to deepen your understanding of the options trading universe with a few easy examples.

But first, let's sum up the most important terms:

Option = provides the right to the contract holder to buy or sell securities at a pre-agreed price

Strike price (agreed-upon price) = this is the price at which you can buy/sell the securities when the contract is exercised

Expiration date = the date until which you can exercise your right under the options contract

US options let you exercise any time before the expiration day, EU options only let you exercise your right on the expiration date.

Options trading examples
Call option example

Let's take a loot at the following example involving a call option on GameStop ($GME) stocks. Imagine you have BOUGHT the below option contract on June 14th, 2021. You also know that currently (on June 14th) $GME trades at $230.

The contract details are the following:

Example of an options contract
Contract name Option price  Option type Strike price Underlying Expiration date
GME23495C00224 $1 Call $255 $GME (GameStop) AUG 14

This means, that by paying $100 (each contract is for 100 shares, so it's $1*100), you will own one contract. This call option allows you buy 100 shares of $GME at $255 per share until August 14th, 2021, whatever the share price is. You are "in the money" if the share price is higher than the strike price ($255).

Options trading examples
Put option example

Let's see an example of a put option.

Example of a put option
Contract name Option price  Option type Strike price Underlying Expiration date
GME23345P00564 $0.85 Put $155 $GME (GameStop) JUL 31

The above means that by paying $85, you will own one put contract. This put option allows you to sell 100 shares of $GME at $155 per share until July 31st, 2021, whatever the share price is. You are "in the money" if the actual share price is lower than the strike price.

Options trading examples
Example of a listing - option chain

Options trading examples - GME option chain

If you are researching options, usually you will find tables like these. These contain great info on market conditions.

What you see here is an option chain. An option chain shows you all the available option contracts for a given security. It contains options prices, the option's strike price, even the stock price (at the top, not seen in the screenshot).

And now, let's dissect the table.

  • Calls/Puts = Shows whether the contract is a call or put option
  • Exp. date = Expiration date of the options contract - it's August 6th in our example
  • Last = Details of the last price recorded for this particular option contract
  • Bid = Shows the potential price the contract holder could sell the contract throughout the timeframe (to the exchange)
  • Ask = Shows the potential price the contract can be bought throughout the timeframe (from the exchange)
  • Volume = Shows the traded volume (number of transactions) between a buyer and a seller of the contract
  • Strike price = Shows the agreed-upon price of the underlying asset at which you can exercise your right on a call/put option (per share)

This info provides basic guidance on current market conditions and helps investors choose the right contract, which they can get via a broker.

Options trading examples
Example of a listing - options trading platform

Options trading examples - Interactive Brokers platform

Let's see what options "look like" on a broker platform. Above you can see a snippet from the Interactive Brokers platform.

This platform is a great example of how a "regular" options trading platform is built. Most of the time, however, you'll only know you are seeing an option contract by looking up the ticker and then you'll see a year and a month next to the ticker's name.

On this platform, you can search for products based on their type. After choosing Options, you can search for the underlying asset and exchange.

With "Last trading date", you can set the expiration date of the instrument. Also, you can filter for strike prices, and you can select a call or put option.

After you found the instrument you're looking for, you can opt-in for your options deal.

There are also more advanced options trading platforms, like tastyworks'. Check out our review of tastyworks to see the details.

Options trading examples
Where to look for more?

Where to look for more?

Hope you liked this quick rundown on options trading examples. If you'd like to go deeper, navigate to one of the articles below:

Author of this article

Bence András Rózsa

Author of this article

Bence András Rózsa is an experienced broker analyst. Having an MSc in international economy and finance, he focuses on equities, cryptos and newcomer financial services. He also has 2+ years of experience within the brokerage industry specializing in stock- and CFD/forex brokers, crypto providers and robo-advisors.

Bence András Rózsa

Broker Analyst

Bence András Rózsa is an experienced broker analyst. Having an MSc in international economy and finance, he focuses on equities, cryptos and newcomer financial services. He also has 2+ years of experience within the brokerage industry specializing in stock- and CFD/forex brokers, crypto providers and robo-advisors.

Everything you find on BrokerChooser is based on reliable data and unbiased information. We combine our 10+ years finance experience with readers feedback. Read more about our methodology

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