Option Market Data Fields Introductions

Below are the key elements and indicators used in options trading. Understanding these will help you better interpret option contracts and market data.

Contract Elements of Options

Options come in two types: Call Options and Put Options.

Apart from direction, each option contract consists of the following core components:

1. Strike Price

The predetermined transaction price of the underlying asset that applies when the option buyer decides to exercise the contract.

2. Expiry Date

The contract’s expiration date.

Options lose value over time and expire after this date.

• In the U.S. market, regular stock options usually expire every Friday (except when the market is closed—then expiration moves to Thursday).
• Monthly options expire on the third Friday of each month.
• Index options may have mid-week expirations in addition to Friday expiries.

American-style options → Can be exercised any time before expiry

European-style options → Can be exercised only on the expiry date

3. Contract Multiplier

The multiplier used to determine the contract’s total value based on the strike price.

Example:

If the multiplier = 100, and the strike price = 20 →

Contract value = 100 × 20 = 2,000

4. Contract Size

The actual quantity of the underlying asset each option contract represents.

Typically 1 option = 100 shares, unless adjusted due to corporate actions.

Example:

Option premium = 0.50

Contract size = 100

Total premium = 0.50 × 100 = 50

Option Indicators and Greeks

Option Greeks measure how option prices react to changes in market conditions.

1. Implied Volatility (IV)

The market’s expectation of the underlying asset’s future volatility.

IV is derived by inputting the option’s market price into a pricing model (commonly the Black-Scholes model).

2. Delta

Measures how much the option price changes when the underlying asset moves by one unit.

Example:

Delta = 0.50 → If the underlying rises by $1, the option price increases by ~$0.50.

3. Gamma

Measures how much Delta changes when the underlying asset moves by one unit.

Gamma reflects the sensitivity of Delta.

4. Theta

Measures time decay — how much the option price decreases as one day passes, assuming all else stays constant.

5. Vega

Measures how much the option price changes when the underlying asset’s volatility increases by 1%.

6. Rho

Measures how much the option price changes when the risk-free interest rate changes by 1%.

Disclosures

This article is for reference only and does not constitute any investment advice.