by Dawn Pennington 08/22/08
WHAT HAPPENS IF SOMETHING CHANGES WITH THE STOCK?
If shares split 2-for-1, then if you held an option at the $30 strike, you'll instead hold two options at the $15 strike. The amount of your investment doesn't change, just the way your assets are represented on your brokerage statement. In the case of a 2-for-1 split, you get twice as many options at half the price.
Strike price codes run the ranks from A to Z. In the case of our Harrah's calls, at the $70 strike, the representative letter is N. That letter actually encompasses options at the $70, $170, $270 and $370 strikes, no matter what the underlying stock is.
So, would that mean that the H-E-T-J-N ticker could represent the HET Oct 170 Calls, even if the stock is only trading for about $90 a share? Theoretically, yes, but only if the stock were trading in that neighborhood (i.e., there would not be calls available at both the $70 and $170 strikes simultaneously).
If HET is trading at $90, the highest-available option strike that shows in its near-the-money option chain could be at $110, and the lowest strike price is $60. But if HET traded up to $110, more options with higher strike prices would become available for trading.
As a final note, option tickers do not have to have five characters. Some stocks like Sprint and Citibank, which have only one letter in their root symbol (S and C, respectively), can make for a short, three-character ticker.
CHECK TWICE, TRADE ONCE
You should always be careful when buying and selling options that you give your broker the right ticker. For example, you would be correct if you wanted to buy an AT&T (T) July 45 Put option with a ticker of TSI, but if you are in a hurry and type in TSI without double-checking, you might end up with shares of something called the TCW Strategic Income Fund, whose ticker is also TSI.
In any case, it's not necessary to memorize the formula for compiling an options ticker, but when it comes to buying the right one, a little bit of know-how might help ensure that the orders you place with your broker are error-free because you are 100% sure of what you're buying!
Ready to learn more about options tickers? Check out Dawn Pennington's "Options Tickers Can Stay the Same" and "Why Options LEAP to New Ticker Symbols."
If you are familiar with buying calls and puts, we'll show you how to buy them even cheaper.
Understanding Options Expiration
Just because a stock has options available for trading doesn't mean that there are options available to trade in each calendar month ... at a particular time.
This technique can help you breathe a sigh of relief as it aims to relieve a 'choking' portfolio.
'Order' Your Broker to Enter Trades Cheaper
Let your broker do the work! With the right directions you don't have to be glued to your computer screen.
