Option quotes stock trading
In this case the numerical representation shows where the option contract is currently trading at the penny wide Bid and Ask spread, the Bid being 0.
This is listed under the price and highlighted in yellow. Under Depth we are told that at that very moment in time there were four market participants bidding while six were offering at that price level. This summary information, given to us on the Summary Pane, is good but it does not give us any specifics on the size and the names of market participants.
Now, let us go slowly through these specifics. The above table shows that the Bid and Ask spread for BOX is a nickel wide while the real market is only a penny wide. A trader not using a Direct Access Trading DAT platform might be getting hit by this wide slippage every single time an order is routed. Popular stocks have dozens of market makers actively trading shares on any given day.
Typically, an L2 quote screen will place active buy orders in one column and sell orders in another, sorting both columns by price.
The single most important piece of information day traders get from L2 quotes is the order sizes putting pressure on both the bid and ask prices. An L1 quote tells traders only what the best buy and sell offers are at any given time. However, L2 quotes tell traders how large those offers are and how many more orders are in line behind them after the first order is filled. In addition, by watching L2 quotes closely for several days, traders can identify which market makers s are dominating the trading action for a given stock.
Finally, by looking at order sizes, traders can deduce what type of buyers and sellers are driving the action. If you go to Yahoo, MSN, CBOE, or your brokerage account and pull up an option quote, you will notice that the layout of each of their option chains is completely different.
However, they all essentially have the same information displayed, but look completely different. As you can see from the picture, there are several different expiration months listed horizontally across the top of the option chain Aug 09, Sep 09, Dec 09, etc. For our example we are looking at all the call and put options that expire the 3rd week of December Some traders want to stay in a trade 1 week, some want to stay in a trade 2 months, so your trading plan will dictate which month you look at.
Each stock option chain will list out all the call options and all the put options for the particular stock. Depending on which option chain you are looking at, the call options may be listed above the put options or sometimes the calls and puts are listed side-by-side.
The first column lists all of the different strike prices of the stock that you can trade. X" is the ticker symbol for the 09 December 25 call option. The symbol identifies 4 things: The third column lists the last price at which an option was traded was opened or closed.