The pricing system for stocks is relatively simple. Want to buy 200 shares of Amazon? Just login to your stock trading software, look at the price, then buy it if you think the price is fair, or don’t buy it if you think it's too high.
It’s no different then a price tag at a retail outlet. Like...browsing that stained green couch you saw at the Salvation Army. The price tag says $25. Will it look good in your living room or not (once you get it deloused, of course)? The same with stocks. They basically have a price tag. Amazon is currently trading at $1,850 per share. One price...one decision.
Option trading is more complicated. There are different underlying assets and different expiration dates. The price presentation is more intricate. Thus, you have an option chain (or, as it's called by Keanu Reeves fans, an options matrix). The system provides a list of available option contracts for a particular asset and a particular expiration date. It consists of both puts and calls, as well as various strike prices, for the given asset and maturity. Each of these variations is presented with its price.
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Finance: What is Intrinsic Value (of An ...6 Views
Finance allah shmoop what is the intrinsic value of an
option All right this is brandi She owns a twelve
dollars strike price call option toe buy a share of
my fifteen minutes are up dot com a retirement home
chain for reality tv stars who recently gained self awareness
Well the stock is trading for fifteen bucks a share
of this moment Her strike price is twelve so the
intrinsic value of that option is fifteen minutes twelve or
three bucks that is it is three dollars in the
money and if brandy converted it into a share this
moment and then immediately sold the stock for fifteen dollars
in cash well she'd make three bucks But there's a
catch per call option doesn't expire for five weeks so
that three dollars in the money is actually worth more
than three dollars because she has data or time yet
to exercise and convert or just sell the option itself
So it's worth mohr because well a stock might go
up from fifteen dollars in overtime Stocks go up so
in the next five weeks well couldn't go up a
dime twenty cents twenty five cents and make that three
Dollars worth three ten three twenty three Twenty five Sure
sure it could happen So yeah that's The difference between
actual value and intrinsic value You get seita kickers in
there making the option's worth more than just converting them
into stock and selling them right there And yeah it
looks like our one and a half minutes are up
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