Option Chains & Quotes
Learn how to read an options chain like a map. We will break down quotes, spreads, volume, open interest, and the Greeks so you can choose strikes and expirations with confidence.
Before You Trade
These examples and charts are simplified teaching models. Confirm live pricing, liquidity, and assignment risk in your broker before placing real trades.
1. Option Chains & Quotes
An options chain is a table of every available option for a stock. It is organized by expiration date (the rows) and strike price (the columns). Each row shows what the market is willing to bid and ask for each call and put. Think of it as a menu: every strike is a different “price reservation,” and the quotes tell you what it costs to buy or sell that reservation.
Big picture
Your job is to find the strike and expiration that fits your forecast, risk tolerance, and timing. Everything else in this lesson helps you make that choice with less guesswork.
Expiration date
The last day the option is tradable. Weekly options expire fast and move quickly, while monthly/longer-dated options move more slowly.
Strike price
The price at which you can buy (call) or sell (put) shares. Strikes closer to the stock price move more with the stock.
2. Reading an Options Chain
A standard chain shows calls on the left and puts on the right, with the strike in the center. Start by locating the stock price. The strike closest to the stock is called at-the-money (ATM). Strikes above are out-of-the-money (OTM) for calls, and strikes below are in-the-money (ITM) for calls. Reverse that for puts.
| Type | Strike | Bid | Ask | Volume | Open Int. | IV% |
|---|---|---|---|---|---|---|
| Call | 95 | $6.10 | $6.35 | 220 | 1240 | 24% |
| Call | 100 | $3.20 | $3.35 | 840 | 3860 | 22% |
| Call | 105 | $1.45 | $1.55 | 510 | 2140 | 23% |
| Put | 95 | $1.15 | $1.25 | 460 | 2480 | 25% |
| Put | 100 | $2.75 | $2.95 | 930 | 4120 | 24% |
| Put | 105 | $5.90 | $6.25 | 310 | 1690 | 26% |
How to scan quickly
First find the strike closest to the stock price. Then compare a few strikes above/below to see how much extra premium you pay for better odds (ITM) or a cheaper lottery ticket (OTM).
3. Bid/Ask Spread, Volume, Open Interest
Every option quote has two prices: the bid (what buyers pay) and the ask (what sellers want). The difference is the spread. Tight spreads are cheaper to trade and usually mean the option is liquid. Wide spreads are costly and often show a less active contract.
Higher volume usually means tighter bid/ask spreads and less slippage.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Volume is the number of contracts traded today. Open interest (OI) is the number of contracts still open after today. High OI means the strike is popular and has many participants. Volume tells you how active it is right now. Volume resets each trading day, while open interest is published after clearing and updates with a delay.
Open interest often clusters around popular strikes like round numbers.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Tight spreads
Easier to get in and out with minimal cost. Look for pennies-wide spreads on liquid names and expirations.
Thin volume
Expect larger price swings and harder fills. You might pay near the ask and sell near the bid.
4. Choosing Strikes & Expirations
Picking the right strike is a balance between probability and cost. ITM options cost more but behave more like stock. OTM options are cheaper but need a bigger move to profit.
ITM (safer)
Higher premium, higher delta, closer to stock-like behavior. Great when you want the trade to move with the stock quickly.
ATM (balanced)
Sensitive to both price and volatility. Good for directional bets when you expect a near-term move.
OTM (cheaper)
Lower premium but lower probability. Useful for defined-risk “lottery ticket” trades.
Expiration is about timing. Short-dated options are cheaper but decay quickly. Longer-dated options cost more but give you time to be right. A common beginner approach is to pick 30–60 days to expiration for directional trades and avoid the most extreme weeklies until you are comfortable with time decay.
Quick rule of thumb
Match your expiration to your expected catalyst. If you think the move happens in two weeks, don’t buy a 1-week option.
5. Greeks in Action (How Options Move)
The Greeks explain why an option price changes. They are like dials: delta measures how much price changes for a $1 move, gamma shows how delta accelerates, theta shows how time decay erodes value, and vega shows how sensitive the option is to implied volatility.
Delta increases as a call goes deeper ITM. Near the strike, small price moves have the biggest effect.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Gamma peaks near the strike. This is where delta changes the fastest.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Theta decay accelerates into expiration. The curve below shows value bleeding faster near the end.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Vega: options get more expensive when implied volatility rises.
Illustrative example only: chart values are simplified to teach mechanics and are not live quotes or trade forecasts.
Delta example
A call with delta 0.55 should gain about $0.55 if the stock rises $1. If the stock rises $2, the option gains about $1.10—before other factors like gamma or IV changes.
Gamma example
Suppose delta is 0.50 and gamma is 0.08. If the stock rises $1, delta becomes roughly 0.58. The next $1 move adds more value because delta is higher.
Theta example
If theta is -0.06, the option loses about $0.06 per day with no stock movement. That decay speeds up in the final weeks.
Vega example
If vega is 0.12, and IV jumps 5 points (say 20% to 25%), the option gains about $0.60 even if the stock price doesn’t move.
6. Putting It All Together
Here is a simple workflow for picking a contract:
- Step 1: Pick the expiration that matches your expected move (30–60 DTE is a safe starting range).
- Step 2: Scan the chain for tight spreads and healthy volume/OI.
- Step 3: Choose a strike based on your risk tolerance: ITM for higher probability, ATM for balance, OTM for lower cost.
- Step 4: Check the Greeks. Confirm delta matches the speed you want, and make sure theta decay isn’t overwhelming your timeline.
Beginner focus
Most new traders do best with liquid names, tighter spreads, and expirations that give them enough time. Avoid ultra-far OTM weekly contracts until you are comfortable managing decay.
Who This Is For
Beginners who understand calls and puts and want to learn how to read an options chain to choose strikes and expirations.
Learning Objectives
- • Read and interpret an options chain including bid, ask, volume, and open interest.
- • Understand how bid/ask spreads affect your cost to enter and exit a trade.
- • Use volume and open interest to gauge liquidity at different strikes.
- • Choose strikes and expirations based on your outlook and risk tolerance.
- • Apply a simple workflow for selecting an option contract.
Example Walkthrough
Scenario: XYZ stock is at $100. You are moderately bullish and want to buy a call with 45 days to expiration. You open the options chain.
You choose the $100 ATM call
Bid $3.20 / Ask $3.35. Volume: 840. Open interest: 3,860. The tight spread ($0.15) and high volume mean good liquidity. You place a limit order at $3.28 (near the midpoint) and get filled.
Compare: the $105 OTM call
Bid $1.45 / Ask $1.55. Cheaper premium ($1.50 vs $3.28) but needs a larger stock move to profit. Breakeven is $106.50 vs $103.28 for the ATM call.
Best case: XYZ rises to $110. The $100 call is worth ~$10, giving you ~$670 profit. Worst case: XYZ stays below $100. The call expires worthless and you lose $328.
Common Mistakes
Ignoring the bid/ask spread
A wide spread can cost you significantly on entry and exit. Always check liquidity before trading.
Chasing low volume strikes
Low volume and open interest often mean poor fills and slippage. Stick to active strikes with healthy OI.
Picking expiration too short
Very short-dated options are cheap but decay extremely fast. Match your expiration to your expected catalyst timeline.
Not comparing multiple strikes
Always look at 2-3 strikes before deciding. Compare breakevens, delta, and cost to find the best fit.
Quick Recap
- • An options chain lists every available contract organized by strike and expiration—scan for tight spreads and good volume first.
- • Bid/ask spread is a hidden cost; tight spreads save money, wide spreads cost money.
- • Match your strike and expiration to your thesis: ITM for higher probability, OTM for lower cost, and enough time for your expected move.
Next lesson
Orders, Expiration & P&L Basics
Up nextMaster market vs limit orders, expiration and assignment, slippage costs, and basic P&L concepts.
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