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Options Trading: How to Read an Options Listing

Ahh, the options listing... Trust me, it isn't as bad as it looks.

It starts with understanding a rather long set of symbols that looks something like this:


This code is simply the ticker symbol for your option. And once you break it down, you'll find that it holds a wealth of information, including all the "standardized" terms we talked about in this article.

The first three or four letters are just the stock ticker for the specific underlying stock, in this case, Google Inc. (NasdaqGS: GOOG):


The next two digits tell you the year the option expires. This is necessary because long-term options last as far out as 30 months, so you may need to know what year is in play. In this case, the Google option is a 2012 contract:


The next four digits reveal the month and the standard expiration date. The expiration date does not vary. It's always the third Saturday of the month. And the last trading day is always the last trading day before that Saturday, usually the third Friday (unless you run up against a holiday). In this case, you've got a March contract (03). And the third Saturday of March 2012 is the 17th.


Now you'll see either a C or a P, to tell you what kind of option you're dealing with - a call or a put. This one happens to be a put:


After that comes the fixed strike price, which is 600:


Finally, any fractional portion of the strike is shown at the end. This comes up only as the result of a stock split, where a previous strike is broken down to become a strike not divisible by 100:


Now that you're a pro, let's take it a step further.

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Options Trading: The Most Important Piece of Advice for Beginners

Here it is. The most important piece of advice I have for anyone thinking about options trading.

Don't let the red tape hold you back.

A lot of experienced and sophisticated investors shy away from anything that involves paperwork.

They think they're not qualified or ready, or simply that it's not worth the trouble.

Don't be one of them.

Yes, you will have to fill out an options application with your broker, but it's easy.

In fact, you had to file a similar form just to open your trading account in the first place. Now, if you want to upgrade your account to be "options approved," it's just another small step away.
Admittedly, the application may look intimidating at first glance. It is full of disclosures, legal qualifications and the kind of small print that is worrisome.

Yet the purpose of the application is simple enough.

Your broker just wants you to state that you know enough about options to make your own trading decisions.

And not to worry... It's not a quiz.

The disclosures are designed to gauge your level of experience. But their real goal is to let the brokerage firm off the hook in case things go terribly wrong. Of course, that's not going to happen to you.

But if a broker lets anyone trade without at least appearing to check them out first, they could be liable for your losses. And no one wants that.

Because options are by definition speculative, the New York Stock Exchange (NYSE), Financial Industry Regulatory Authority (FINRA), and National Association of Securities Dealers (NASD) all have rules and policies about "suitability."

That's the real reason you have to go through this (very small) hoop.

So you'll fill out the application. They file it away into the "just in case" drawer and you're ready to trade.

What's on the Options Trading Application?

The options application will ask some questions you would expect: Name, address, employment and employer name, annual income and all sources of income. They also want to know your net worth and liquid net worth, marital status and number of dependents.

Then there are a few questions you might not expect.

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