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 21, 2014, 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 21, 2014 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.

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