PRLog – Nov. 1, 2014 – An option chain is a list of all the stock option contracts available for a given security (stock).
There are only 2 types of stock option contracts, puts and calls, so an option chain is essentially a list of all the puts and calls available for the particular stock you’re looking at.
Now that wasn’t so hard to understand was it? Well the confusing part comes when you actually pull up a stock option chain.
All that easy-to-understand information suddenly gets lost in translation and you’re left looking at a table full of numbers and symbols that make absolutely no sense at all.
Before you learn how to read an option chain, let’s do a quick recap of the 7 step trading process thus far:
Step 1: You’ve used the Investor’s Business Daily (IBD) to find a list of good stocks to buy.
Step 2: You’ve looked at the stock charts of those stocks and if you like what you see you add it to your stock watch list until you reach a list size of 50-100 stocks.
Step 3: You’ve used a bit of stock trend analysis to review your stock charts on a daily or weekly basis. This process is used to find potential trades
Step 4: After you’ve found a potential trade, you look over the option chain and pre-select the option you’re going to buy or sell.
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