Equity Option Cycles

Equity Option Cycles

Beginning options traders often are disturbed approximately the organization of option chains. This paper covers the basic conceptions surrounding which options are available at any given point in time, and how that may affect the options you commerce.

Equity options forever have options accessible for the new month and the following month. In counting, 2 more months will be available; merely those two months will vary, depending above which of three adoption cycles your discretion falls within: the January, February, alternatively March quarterly cycles. For an option in the January wheel, Jan, Apr, July, and Oct are the months namely will be accustomed; for the February cycle, the months of Feb, May, Aug, and Nov are accustom; for the March cycle, the months of Mar, Jun, Sep and Dec are accustomed. So, in January, for an option in the January cycle, the Jan and Feb options (current and next months) will be available and two appended months: Apr and July.

By contrast, an option in the February cycle will have the retinue options available in January: Jan, Feb, May, and Aug. Similarly, an option in the March cycle will have the retinue options available in January: Jan, Feb, Mar, and Jun. We can illustrate how this goes for a annual with Apple Computer (AAPL) in the January cycle: In January, the Jan and Feb options (current and next months) will be available plus two additional months: Apr and July. In March, the Mar and Apr options (current and next months) will be available plus two additional months: Jul and Oct. In June, AAPL will offer the Jun and July options (current and next months) plus two additional months: Oct, and, since we have scamper out of months for the January cycle, we add Jan. Since AAPL offers LEAPS options, a fashionable LEAPS option namely additional, and the nearest LEAPS option is converted to the January option with a fashionable ticker symbol. For stocks without LEAPS options, the Jan option is added by that period. The root of the ticker symbol, the 1st three letters, is different for the LEAPS options; for example, with AAPL, the short term options always begin with APV, for in APVFH for the June $140 calls. The LEAPS options use the root of VAA, for in VAAAH for the Jan 2011 $140 LEAPS cry.

Index options are alike, but have some unique features. Most index options offer the front month plus the next two months, plus three more months from the March option cycle. However, several exceptions exist, e.g., the OEX has 4 approximate months available plus 1 more month from the March cycle.

In general, more months are available for index options because institutional traders use these options to hedge large stock portfolios. Check the network site of the commute that produces the index option of interest for the details of the months offered, e.g., look the CBOE network site for SPX and OEX, but the ISE web site for MID, the S&P Mid Cap 400 index.

This is probably more elaborate than needed along the average options merchant. The key message to reserve in mind is that anybody equity options necklace will always have options available for the front month, next month, and two additional months. Those additional months will vary depending on the option cycle of which it is a membership. A smaller subset will too have the LEAPS options available.

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