Option Chain Graph

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per trade | per contract | minimum | per trade | per lot |

Plot Chain Help

Option Combinations Help

Introduction

Entering Option and/or Stock Positions

Entering Commission data

The Graph

# Plot Chain Help

### Introduction

The purpose of this program is to help you visualize and select among the various options available for a given stock (or ETF) on a given date.

### Select Option Types

Unfortunately the Yahoo option pages have become an incomprehensible kloodge, even for individual months. They have different expiration dates and contract sizes all shown in the same table, distinguished only by hard to decode OCC codes.

Well, a lot more understandable than the raw Yahoo pages, but still probably more information than we want, so here it is trimmed to show only the standard size Monthly contracts we are most likely interested in:
Select one or more option sets to display

### Select Option Groups

This is the table we use
to select the option groups we want to examine. For each row:

The first column, labeled 'Expiry' is the expiration date in yymmdd format, so '140118' is 2014, January 18.

'Days Left' is the number of calendar days from today to expiration of the option.

'#Calls' and '#Puts' show the number of different strike prices available for that expiration date for each respective type of option.

### The main option graph

If we selected the put
and call for 131116 in the above table, and clicked the 'Do the Plot'
button, we'd get a graph like this:

The x-axis shows the strike prices. The y-axis shows the option premiums.

The blue lines outside the axes show the same values divided by the current stock price.

Calls are plotted as green squares, puts as red squares.

A vertical line connects the bid and ask prices, but may be obscured by the square if it is short.

The size of the square is proportional to the logarithm of the volume.

The fitted black lines go through the midpoints of the bid/ask lines.

The vertical yellow line shows the current stock price.

The diagonal yellow lines show the intrinsic value of in-the-money options.

If you click on one of the option squares, a popup box will show its details.

You can zoom in and out using the buttons below the graph

# Option Combinations Help

### Introduction

Once you have used the Plot Chain program to see a list of the options available for a particular stock with a particular expiration date, you may be moved to try out a hedge and see how it would work. That's what this Combo program is for.

It will allow you to visualize and experiment with option combinations on the stock and see the range of possible profits and losses, i.e. it will show a graph of the profit at expiration for various closing stock prices. A stock position can be included, and the program can also account for commission costs.### Entering Positions

Notice that the table above, which shows the puts and calls, has an extra column labeled "How Many?" after the put and call columns. Here you may enter the number of option contracts of that you want to include in your test hedge. Use negative numbers for short positions. It is best to use the smallest number of contracts, to keep the axes legible. Eg if you want a hedge with 20 long and 20 short contracts, use the smallest number that have the same ration, in this case, 1 and 1.
### Entering Commission data

The second table is for entering commission data if you want to do so. You can leave it empty, but sometimes commissions can wipe out profits, so it is wise to include them before actually executing a trade.
### The Graph

Once you have entered the option information and the commission parameters if desired, click on the button labelled 'Do the Plot' to bring up the graph.

Entering Option and/or Stock Positions

Entering Commission data

The Graph

The purpose of this program is to help you visualize and select among the various options available for a given stock (or ETF) on a given date.

This is a program to allow the user to enter several option positions on the same stock and same expiration, and it will show a graph of the profit at expiration.

The Expiry dates are in format 'yymmdd'.

Options with low volumes may not reflect current prices. Average of bid, ask is a better indication.

Clicking on a line in the table will show an alert box with more information on that option, and circle the option on the graph

Clicking on the graph will pop-up information on the nearest option.

'Annualized Return' is a theoretical construct for comparing different options, assuming you sell the option and make the value of the time premium at expiration.\nThe return is calculated as the % of time premium/Strike price multiplied by 365/days left

The program is started by providing the symbol of the stock of interest. It then retrieves the most recent stock and option prices from the Yahoo Finance website. Unfortunately, Yahoo usually clears the bid and asked prices at about 1 AM Eastern Time (10 PM Pacific Time) before the market opens, so this program will not be able to operate during those times. Prices are usually available all weekend long, until 1 AM Monday Morning Eastern Time.

The program header will show the stock symbol, date, and last stock price. The stock symbol is a live hyperlink to the Yahoo option page for the stock.

Unfortunately the Yahoo option pages have become an incomprehensible kloodge, even for individual months. They have different expiration dates and contract sizes all shown in the same table, distinguished only by hard to decode OCC codes.

Standard options expire on the 3d Friday of each month, but many stocks now also have weekly options expiring on the other Fridays, distinguishable only by looking at the yymmdd date and mentally figuring which Friday they represent. In addition, standard option contracts are for 100 options each, but many expensive stocks and ETFs now also provide 'mini' contracts of only 10 options each, distinguished only by a '7' at the front of the date. And for the high-rollers, a 'J' in that position indicates a 'Jumbo' contract of 1000 options. And all these are in the same table!

In the SPY example given here, there were a total of over 3100 separate options listed. And if you looked at the 'straddle' views, there would be 3 or 4 times that many rows in total.

So the first thing this program does is unscramble this mess and let you see only the ones you want. The Option Type table lets you choose. To wit:

The 'Hide/Show' buttons let you toggle off display of Weekly, Mini, or Jumbo options to minimize the clutter.

The default is to show weekly and monthly standard sized options.

Here's what our SPY example looks like with all options shown. The weekly options are given a blue background. The standard monthly options are left white.

Well, a lot more understandable than the raw Yahoo pages, but still probably more information than we want, so here it is trimmed to show only the standard size Monthly contracts we are most likely interested in:

The first column, labeled 'Expiry' is the expiration date in yymmdd format, so '140118' is 2014, January 18.

'Days Left' is the number of calendar days from today to expiration of the option.

'#Calls' and '#Puts' show the number of different strike prices available for that expiration date for each respective type of option.

To see strangles and collars, you will need to select both the call and put boxes for the date.

You can select options for more than one expiration date, but they will only be matched with options expiring on the same date.

Beneath the table are other selections which are self-explanatory:

Show only options with volume equal or greater than

The blue lines outside the axes show the same values divided by the current stock price.

Calls are plotted as green squares, puts as red squares.

A vertical line connects the bid and ask prices, but may be obscured by the square if it is short.

The size of the square is proportional to the logarithm of the volume.

The fitted black lines go through the midpoints of the bid/ask lines.

The vertical yellow line shows the current stock price.

The diagonal yellow lines show the intrinsic value of in-the-money options.

If you click on one of the option squares, a popup box will show its details.

You can zoom in and out using the buttons below the graph

You may notice that option prices may appear far out of line, especially far from the money. There are many reasons for this: low volume, last trades that occurred when the stock price was different, etc. On the other hand, the mean bid/ask line is usually quite smooth. This is because it is set by the computers of the big arbitrageurs (banks, hedge funds, etc.), all using similar models for what the price ought to be.

It will allow you to visualize and experiment with option combinations on the stock and see the range of possible profits and losses, i.e. it will show a graph of the profit at expiration for various closing stock prices. A stock position can be included, and the program can also account for commission costs.

We use the word "stock" here to refer to any underlying security on which options can be written, such as stocks, exchange-traded funds (ETFs), indices, commodities, etc.

We use the word "combo" here to refer to any combination of long and/or short positions in a stock and/or its options with the same expiration date. I.e. the program does not support calendar spreads.

We recommend that you use this help file by **Right**-clicking on the link on the Option Combo main page, and from the resulting context menu, selecting "Open in a new window". That way you can move and size this window independently of the main window, and can show both windows at the same time for easier reference.

Options are sold in contracts of 100 options, but prices are quoted for single options. Similarly, stocks are sold in round lots of 100 shares, but prices are quoted for single shares.

The numbers you enter will be the number of option contracts or round lots of stock, but the prices will be for single options or shares, so your actual costs will be 100 times greater.

To include stock in the hedge, as for a covered call, there is a text box below the table. As with the options, a negative number will indicate a short position.

Unlike the table above, which was in terms of individual options or shares, Commissions are usually quoted on the basis of contracts or round lots of 100.

If you have your trading account with one of the common online brokers, you can select their name from the drop-down list just above the commission table, and that will insert the parameters of their commission formulae into the table. Or you can enter any broker's parameters in the boxes yourself.

You should be aware that if an option does not expire worthless, you may incur additional commission fees at expiration to close out the position or exercise an in-the-money option.

The graph plots the stock price at expiration on the X-axis, and the profit at expiration on the Y-axis. Remember that these plots are for single options or shares, while you will be dealing with contracts or lots of 100, so the real-world profit or loss will be 100 times that shown on the the Y-axis.

Note that before expiration, profits can be very different from what they would be at expiration, and pre-expiration option prices are often far from what Black and Scholes might predict.

The Put components of the hedge are plotted in Light Red

The Call components are plotted in Light Green

Stocks are plotted in Light Blue

The totals are plotted in **Heavy Black**

The graph is drawn to cover the range of stock prices over which changes of slope of the profit line occur, so a line which intersects the borders of the graph can be expected to proceed indefinitely with the same slope.

© 2017 Harvey S. Frey