What is Option Series?
253 reads · Last updated: December 5, 2024
An option series refers to a grouping of options on an underlying security with the same specified strike price and the same expiration month. However, call and put options are parts of separate series. For example, a call option series would include the available calls on a specific security at a certain strike price that will expire in the same month.
Definition
An option series refers to a group of options on the same underlying security that have the same specified strike price and expiration month. Call options and put options are part of different series. For example, a call option series would include available call options for a specific security expiring in the same month at a particular strike price.
Origin
The history of options trading dates back to ancient Greece and Rome, but the development of modern options markets began with the establishment of the Chicago Board Options Exchange (CBOE) in 1973. The concept of option series emerged with the standardization of options markets, helping investors better organize and manage option contracts.
Categories and Features
Option series are primarily divided into call option series and put option series. A call option series involves the right to purchase the underlying security at a specific strike price and expiration date, while a put option series involves the right to sell the underlying security at a specific strike price and expiration date. The features of each series are defined by the combination of strike price and expiration date, which determine the market value and risk characteristics of the options.
Case Studies
Case Study 1: Apple Inc.'s option series. Suppose in December 2024, Apple's call option series includes options with a strike price of $150 and an expiration date in January 2025. Investors can choose to purchase these options based on market expectations to gain potential profits. Case Study 2: Tesla Inc.'s put option series. Suppose in December 2024, Tesla's put option series includes options with a strike price of $600 and an expiration date in January 2025. Investors might purchase these options to hedge against market downturns.
Common Issues
Common issues include how to select the appropriate option series and how to assess their risks and returns. Investors often misunderstand the leverage effect of options, assuming all options can yield high returns while overlooking the potential high risks. It is recommended that investors carefully analyze market trends and their own risk tolerance when selecting an option series.
