Option Series

  

See: Option Class.

An option series separates calls and puts. We know, not very enlightened. Maybe, one day, puts and calls can choose their own series. But we haven't reached that point yet.

For now, a particular series includes either all the calls or all the puts for a single underlying asset, with the same strike price and the same expiration. So calls for NFLX with a strike price at $360 and a July expiration would count as one series; meanwhile, puts for NFLX with a strike price at $360 and a July expiration would represent another series.

Related or Semi-related Video

Finance: What Is a Put Option?83 Views

00:00

finance a la shmoop what is a put option? hot potato hot potato

00:07

ow ow! yeah remember that game well nobody wanted the potato, poor thing. the

00:11

players wanted to put it in someone else's hands. well put options kind [glue put around a flaming potato]

00:18

of work the same way. a put option is the right or option or choice to sell a

00:24

stock or a bond at a given price to someone by a certain end date.

00:29

all right example time. you bought netflix stock at the IPO a zillion years

00:37

ago at $1 a share. that's you know splits adjusted. all right now it's a hundred

00:42

bucks a share. if you sell it you pay taxes on a gain of 99 dollars a share. in

00:49

California that would be a tax of something like almost 40 bucks. well the

00:53

stock was a hundred but you keep only something like 60. feels totally unfair.

00:58

right so you really don't want to sell your stock but you're nervous about the [graph shown]

01:04

next few months that Netflix will crater for a while and go down ten

01:07

maybe twenty dollars. longer term though you think it'll hit 300. so this is the

01:13

perfect setup to maybe look at buying some put options on Netflix. if the stock

01:18

goes down your put options go up. with Netflix volatile but at a hundred bucks

01:23

a share ,you look up the price of an $80 strike price put option expiring in

01:28

December, and you know that's mid-september now .for five bucks a share

01:33

you can protect your stock for the next few months .think about it like temporary [stocks placed in vault]

01:37

term life insurance. you pay the five dollars a share in the stock goes down

01:41

to 82 by mid December, worst of all worlds. well not only did you lose the $5

01:48

a share but your stock has lost $18 in value. but had Netflix really cratered

01:55

and gone to say $60 a share well you would have exercised your put and sold

02:01

your shares at 80 bucks. well those put options you paid $5 for

02:06

would be been worth 15 bucks a share. in buying that put option you've [equation shown]

02:11

guaranteed that your loss will be no more than a $75 value for your Netflix

02:16

position at least for that time period and ignoring taxes. well remember that

02:21

options expire after December whatever like the third Friday of the month it's

02:26

usually when options expire, you then have no protection and your shares float

02:31

along naked. naked? really who knew accounting could get so [paper put option goes "skinny dipping".]

02:36

raunchy. yeah well that's naked put options.

02:40

that's what they really are people.

Up Next

Finance: What Is a Call Option?
25 Views

What is a call option? A call option is a type of contract that lets the investor buy shares of a stock at a certain price and within a window of t...

Finance: What is Intrinsic Value (of An Option and of an Asset)?
6 Views

The intrinsic value of an option is the share price of a stock minus its strike price - i.e. the "in the money" amount.

Finance: What are stock options in 90 seconds or less?
0 Views

What are stock options? Stock options are derivative contracts, each representing 100 shares, that give the holder the right to buy (call) or sell...

Find other enlightening terms in Shmoop Finance Genius Bar(f)