By Ryan Watkins, Lead Coach

This article is a follow up to Part One that can be found here.  Let’s continue our topic of How to Read an Option Chain.  In the first article, we learnt how to read and use an option such as where the Put and Call are located. We also look at Moneyness and where At-The-Money, Out-of-The-Money, and In-The-Money is located.

Now we will look at that in a different way.  We will look at it from a visual perspective on an actual chart as if we are placing an order using an option chain.

A quick reminder on Moneyness on the Option Chain

We will use this as a way to view the Moneyness on a chart as we traders use charts to analyze our trades.

Call Side Moneyness Chart Visual

Here we will look at the Moneyness on a chart from the Call perspective. We will look at Oracle (ORCL).  The last price was $61.78 so the nearest Strike Price would be $62.00 and that would be considered In-The-Money (ITM).

Any Strike price above that is considered Out-of-the-Money (OTM) and any Strike Prices below $62.00 is considered In-The-Money (ITM)

The Put side is different however, let us take a look at that next.

Put Side Moneyness Chart Visual

Here we will look at the Moneyness on a chart from the Put perspective using the exact same ORCL Weekly chart.

At-The-Money (ITM) is still the $62.00 Strike, as $61.78 is still last price traded.

Any Strike price below $62.00 is considered Out-of-the-Money (OTM) and any Strike Prices above $62.00 is considered In-The-Money (ITM) as shown in the picture above.

There are many possibilities when it comes to trading options, such as buying a call ITM, ATM or OTM.  Selling a call ATM, ITM or OTM would be more examples and that is just the call side.  Trading options literally give you many “options” as a trader. It is one of the reasons why traders gravitate toward it.

Until next time, be well.

Ryan Watkins

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