When exchange traded options first came into popular existence in the s, it is possible that the founders of the options industry neither fully realized just how useful and prevalent option trading would ultimately become, nor some of the changes that would occur in the ensuing decades. As such they set up a somewhat archaic and limiting method of designating option symbols for trading purposes.

An initiative by the Options Clearing Corporation OCC has set the stage for the implementation of a more intuitive and far more flexible method for designating option symbols.

The intention of the OCC is for this new method to be fully in place by May of Option Symbols - The. In the "old days," each stock option was designated using a three- to five-character symbol. The first, second and third characters were the underlying "root symbol" for the options on a particular stock.

The next character used a single letter to denote whether the option was a call or a put and the expiration month. The last character in an option symbol indicated the strike price and was also denoted using a letter code. For an in depth explanation of the old system, see What do all of the letters in a stock option ticker symbol mean?

A Stock Symbol's Alter Ego The underlying stock symbol was used as the root symbol for the options on that stock whenever possible for stocks listed on the Big Board. Nasdaq stocks that had options traded on them were given a separate three letter option root symbol designation.

For example, IBM — which trades on the New York Stock Exchange — has a stock symbol of IBM and likewise an option root symbol of IBM. Microsoft on the other hand, trades on the Nasdaq.

Microsoft has a stock symbol of MSFT, but was given an option root symbol of MSQ. This method was somewhat non-intuitive as the options on some popular stocks used their stock symbol as the option root symbols while others required the creation of some arbitrarily designated option root symbol. The Month of L As if that were not confusing enough, call options had their expiration months designated using the letters "A" through "L.

In a similar fashion, put options had their expiration months designated using the letters "M" January through "X" December.

That'll Be C Dollars, Please Finally, to round out the puzzle, option strike prices were designated using a letter code also. The letter "A" denoted a strike price of 5, "B" for 10, "C" for 15 and so on through "T" for the strike. When strike prices were offered at price levels such as 7. The fact that the strike price designations used a letter code to cover strike prices from 5 to suggests that the system was outdated.

Once LEAP options came into existence it was possible for some high priced stocks to have 7 to 12 root option symbols. As a result, using this method the Yahoo April 20 call has an option symbol of YHQDD. This was not a terribly intuitive approach. Overdue Changes And while the options industry continued using this system for a very long time, the introduction and proliferation of such products as LEAP option, index options, yield-based options , short-dated options, flex options and foreign currency options , finally pushed things to the point that the Options Clearing Corporation felt compelled to launch the Option Symbology Initiative, a process designed to revamp the method used to structure option symbols in order to create a more intuitive and standard method.

That changeover began in November of , moved to the next phase in February of and is scheduled to be fully implemented by May Most option strategies that protect against particular risks will be completed by using more than one option. To learn more, please read Offset Risk With Options, Futures And Hedge Funds.

Option Symbols - The New Way The new method for designating stock option symbols is much more intuitive and a great deal more flexible than the old method. The new longhand symbols themselves still appear to be somewhat arcane, at least until you consider the information that is being conveyed. So let's take a look at the new method. The basic parts of the new option symbols are:. Let's start at the end and display a "new format" option symbol. We can then break out each part of the symbol and highlight its meaning.

After the changeover to the new format is fully implemented the Google September strike price call will have the following symbol:.

Root Symbols Ultimately all stock options will use the stock ticker symbol for the underlying stock itself as the root symbol for the option.

While this change will be transparent to the majority of traders, it represents a massive and long overdue simplification in the system. Moving forward, all Google options will simply use the same root symbol as the stock itself — GOOG. So the first four characters for all Google options will be the letters GOOG GOOG C The Expiration Year After the root symbol will come the year designation for the option.

This will be done using a two-digit value. So all options that expire in will appear as 10, all options that expire in will appear as 11, and so forth. So the next two characters for all Google options moving forward will be the year designation GOOG 10 C The Expiration Month and Date Rather than simply designating the expiration month, the new option symbols will spell out the actual expiration date.

While most stock options expire on the third Friday of the month, some index options expire a day earlier and some stocks and indexes now trade quarterly or monthly options that expire on the last trading day of the indicated period. Therefore, spelling out the expiration date long hand clearly delineates between the different types of options.

So the next four characters for all Google options moving forward will be the actual option expiration date of September 17th GOOG10 C Call or Put Under the old symbol method, the symbol itself did not specifically tell you if it was a call or a put option. The only difference was that calls were assigned one set of letters to designate strike prices and put options another set of letters. Unless you were versed in which letters designated calls and which designated puts, there was no simply way to tell.

So the next character for all Google options moving forward will be either a "C" or a "P" designating the option as a call or a put GOOG C Strike Price Dollars The next part of the option symbol is used to designate the round dollar portion of the option's strike price. A five-character field is set aside for this. So for the Google call the five characters after the letter "C" would designate the dollar portion of the strike price GOOGC Strike Price Fractions of Dollars The last part of the option symbol is used to designate the fractions of a dollar included in the strike price.

Three characters are set aside for this field. So an option with a strike price of Other cases may involve instances where a stock split has occurred and option strike prices have been split accordingly. For example, let's assume that a stock had an option trading on it with a strike price of 50, and that the stock split 3 for 1. The strike price of 50 would be divided by 3 and would from that point forward be the Within the new symbology, this would be designated in the last three characters as Conclusion The changeover to the new symbology will ultimately simplify the process of identifying specific option symbols.

Consider the differences between the old and new symbols shown below for the Yahoo April 20 strike price call and put options:. While the entries under new symbology are quite a bit longer, a person with just a little knowledge of options would have a much greater chance of figuring out exactly what each symbol represents then he or she would looking at the old letter symbol designations. For a review of option pricing strategies, check out Understanding Option Pricing and Using the Black-Scholes Model.

Equity Options & Stock Index Option Quotes

If you're new to options, check out our Options Basics Tutorial. Dictionary Term Of The Day.

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Understanding The Options Symbology By Jay Kaeppel Share. Option Symbols - The Old Way In the "old days," each stock option was designated using a three- to five-character symbol. The basic parts of the new option symbols are: After the changeover to the new format is fully implemented the Google September strike price call will have the following symbol: GOOGC Root Symbols Ultimately all stock options will use the stock ticker symbol for the underlying stock itself as the root symbol for the option.

Consider the differences between the old and new symbols shown below for the Yahoo April 20 strike price call and put options: Option Old Symbol New Symbol Yahoo April Call YHQDD YHOOC Yahoo April Put YHQPD YHOOP While the entries under new symbology are quite a bit longer, a person with just a little knowledge of options would have a much greater chance of figuring out exactly what each symbol represents then he or she would looking at the old letter symbol designations.

The stock market has changed dramatically since its inception, but the use of ticker symbols has remained largely unchanged. Learning to understand the language of options chains will help you become a more informed trader. Learn more about stock options, including some basic terminology and the source of profits. Trading options is not easy and should only be done under the guidance of a professional.

The option ticker explains four main things about the option: Stocks found on the New York and American Stock Exchange will normally have symbols with three letters or fewer.

Discover whether or not hedge funds have ticker symbols, where you can find ticker symbols and the significance of a ticker Learn how aspects of an underlying security such as stock price and potential for fluctuations in that price, affect the Learn how the strike prices for call and put options work, and understand how different types of options can be exercised Learn about how the difference between in the money and out of the money options is determined by the relationship between An expense ratio is determined through an annual A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies.

A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over No thanks, I prefer not making money.

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