Understanding an options trading instruction

Now that you're ready to invest in options, get familiar with the trading instructions.

  • By MarketSnacks
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An options order contains more information than a stock order. Follow this example to learn what's similar to and what's different from a stock trade order.

Buy to open 1 January 22, 2021, XYZ 70 call at 3.25

Buy Like a stock trade, this is the action.
To open Not like a stock trade, this indicates a new position
("to close" indicates that an existing position is being eliminated).
1 Similar to a stock trade, but different. This indicates the number of contracts being traded (not the number of shares).
January 22, 2021 Not like a stock trade, this is the expiration date; the date at which the option and its rights no longer exist.
XYZ Similar to a stock trade, but different. This is the "underlying," which is usually 100 shares of XYZ stock.
70 Not like a stock trade, this is the strike price; the price at which the stock is traded if an option is exercised.
Call Not like a stock trade, this is the type of option. There are also put options.
At 3.25 Like a stock, this is the price per share of the option. Since the underlying is 100 shares, the total dollar cost is $325 plus commissions.

Next steps to consider

Enter a single or multi-leg options trade.

Use this educational tool to help you learn about a variety of options strategies.

Learn more about the resources and a few tips to help you find option candidates and strategies.

Options trading entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Before trading options, please read Characteristics and Risks of Standardized Options. Supporting documentation for any claims, if applicable, will be furnished upon request.

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