1.4
OPTIONS:
Interpreting Reported Prices
I
n
this topic, you will learn how to interpret option information commonly reported
in the financial press. Table 1.3
provides a recent example for the Ford Motor Company, March 23,
2011.
ITable 1.3
Reported Option Prices
Ford Motor Company (NYSE:F) March 24, 2011 | |||||||
Call Options | |||||||
Strike | Symbol | Last | Chg | Bid | Ask | Vol | Open Int |
10 | F110325C00010000 | 4.54 | 0 | 5.05 | 5.1 | 42 | 818 |
11 | F110325C00011000 | 3.54 | 0 | 4.05 | 4.1 | 22 | 533 |
12 | F110325C00012000 | 2.63 | 0.25 | 3.05 | 3.1 | 41 | 454 |
13 | F110325C00013000 | 1.76 | 0.39 | 2.05 | 2.09 | 28 | 2615 |
14 | F110325C00014000 | 1.06 | 0.72 | 1.06 | 1.09 | 1344 | 3692 |
15 | F110325C00015000 | 0.17 | 0.16 | 0.16 | 0.18 | 8400 | 14131 |
16 | F110325C00016000 | 0.01 | 0 | N/A | 0.01 | 3 | 94 |
19 | F110325C00019000 | 0.04 | 0 | N/A | 0.01 | 10 | 10 |
Put Options | |||||||
Strike | Symbol | Last | Chg | Bid | Ask | Vol | Open Int |
12 | F110325P00012000 | 0.01 | 0 | N/A | 0.01 | 25 | 25 |
13 | F110325P00013000 | 0.01 | 0 | N/A | 0.01 | 75 | 234 |
14 | F110325P00014000 | 0.01 | 0.03 | N/A | 0.01 | 452 | 5172 |
15 | F110325P00015000 | 0.12 | 0.53 | 0.1 | 0.11 | 5152 | 627 |
16 | F110325P00016000 | 0.94 | 0.85 | 0.91 | 0.95 | 128 | 67 |
The first column is the strike or exercise price. The second column provides a description of the option's symbol. Today option symbols have undergone a change so that the symbol contains the relevant contractual information. The underlying asset ticker, F, is provided first. The settlement date is March 25, 2011, "C" indicates a call option, the next set of numbers contain the strike or exercise price.
The option price is a quotation convention such that if you purchased one call option on Ford at its last traded price with a strike price equal to $12 as listed above, this call option controls 100 shares of Ford and the $ price you would pay is $2.63*100 = $263.
After you are comfortable with the reporting of the option
price information, you can experiment with the subject in Option Tutor titled Option
Payoffs to see how you can combine options to create a variety of future
payoffs. Notice that creating
different payoffs costs different amounts, given the different option prices. A major part of this text is concerned with valuation.
Next we provide an overview of the treatment of this problem in Option
Valuation: An Overview.