Have you ever considered investing in options but got confused just from looking at the ticker symbol? At first glance, they can seem a little confusing. A bunch of letters followed by a bunch of numbers just thrown together is enough to scare most investors away. Did you know that option ticker symbols actually serve a purpose and provide valuable information for traders? All those strange combinations of letters and numbers do mean something to investors. If you can break down a ticker symbol into smaller parts, it is actually very easy to understand what it represents.
Deciphering Option Ticker Symbols
Just like stocks, every option contract has a unique ticker symbol. While the underlying stock of an option has only one ticker symbol (e.g., INTC is the ticker for Intel), there can be hundreds for the option contracts tied to that same stock. A stock’s ticker is often very recognizable to an investor, whereas an option symbol can seem a little confusing at first.
To fully understand what an option ticker symbol represents, it is vital to recognize the different parts that make it up. There are four separate pieces of information included in every option symbol. These items include the underlying stock symbol, expiration date, type of option, and the Strike Price.
1. Underlying Stock Symbol
Option ticker symbols are made up of four different pieces of information. The first part of the symbol consists of the ticker symbol of the underlying stock. For example, any contract that begins with ‘INTC‘ represents a contract for the company Intel. All contracts for Microsoft begin with ‘MSFT‘ and Wal-Mart’s start with ‘WMT‘. This helps investors immediately identify which stock the option is for.
2. Expiration Date
The expiration date of an option contract is the day in which the contract is no longer valid and becomes worthless.
For U.S. options, most expiration dates fall on the third Friday of the expiration month. Given that this is such a valuable piece of information about a contract, it is included in the ticker symbol of each contract for investors to identify quickly.
The expiration date of the contract comes after the stock symbol and is represented in the following format: Expiration Year (YY) + Expiration Month (MM) + Expiration Day (DD).
For example, a contract that begins like INTC190621… would represent an option for Intel with an expiration date of June 21st, 2019.
3. Option Type
There are two types of options: Puts and Calls.
- A Put Option is a contract that gives the buyer the right, but not the obligation, to sell a specific amount of stock from the underlying security at a specific price (Strike Price) before a set date (Expiration Date). Investing in Put options is generally viewed as a bearish behavior in the market.
- A Call Option is a contract that gives the buyer the right, but not the obligation, to buy the underlying stock at a specific price (Strike Price) before a set date (Expiration Date). Investing in Calls is generally viewed as a bullish behavior in the market.
Since the type of contract is critical to option investors, it is also included in the ticker symbol. Just after the expiration date, the next character of the ticker symbol represents the option type. A ‘C‘ is used to represent a Call option and a ‘P‘ for a Put option. For example, a ticker that begins with INTC190621C… would represent a Call and INTC190621P… would represent a Put.
4. Strike Price
The final piece of information provided to investors in the option ticker symbol is the Strike Price. Just like the expiration date, the Strike Price provides important information to investors. The Strike Price, also called the Exercise Price, this is the price at which stocks can be bought (Call options) or sold (Put options) before the expiration date.
The remaining values after the option type represent the Strike Price in an option ticker symbol. For example, the Strike Price portion of the following option ticker symbol INTC190621C00050500 would be 00050500. This value includes three decimal places, so the Strike Price would actually be $50.50 in this case. An easy way to calculate this value is to divide the Strike Price portion of the ticker by 1,000.
Here, you can see examples for Intel on Yahoo Finance.
Option Ticker Symbol Examples
Now that we know the different attributes that make up the ticker symbol of an option contract let’s take a look at an example. The following ticker symbol is an actual contract for a U.S. option – PG111022C00060000.
Here is what we can find out about this option –
- Underlying Stock Symbol – ‘PG’ (Procter & Gamble)
- Expiration Date – ‘111022’ (YYMMDD) or 10/22/2011
- Type of Option – ‘C’ or Call
- Strike Price – ‘00060000’ (60000/1000) or $60
We now know this contract represents a Call option for Procter & Gamble with a Strike Price of $60 set to expire on October 22, 2011.
Compared to stocks, trading options can seem very confusing to an investor. While the potential profits from this type of investment strategy can be outstanding, the losses can be substantial as well, especially if the investor does not understand how options work. One of the very first things to learn about options is their ticker symbol and what it represents.
Do you trade options? What other advice can you give for new traders looking to educate themselves on this type of investment strategy?
John Schroeder is a personal finance blogger who enjoys writing about passive income, debt-free living, and financial independence. He also enjoys sharing his experiences in raising a family on a single income, while his wife stays home with their two children. Aside from writing about money, he is an avid runner and enjoys spending time outdoors with his kids.