TipRanks continues to adhere to its commitment to level the playing field for retail investors. Here we are, once again, with our newly launched Options Tool that can help traders make the best investment strategies surrounding options contracts. TipRanks already has a multitude of tools that aid investors to do in-depth research on equities and exchange-traded funds (ETFs). In addition to these tools, we brought Technical Analysis tools for investors and Advanced Chart options so you could carry out trades with the best, timely information at hand.
TipRanks believes in making investors’ lives easier, one tool at a time! This time, we are excited to unveil our all-encompassing Options Tool, which aims to provide a basic understanding of what Options contracts are to investors.
Options are financial derivative instruments that give buyers the right, not the obligation, to buy or sell the underlying security at a predetermined price and date. There are two broad categories of Options: Call options, which offer the buyers the right to buy the underlying security, and Put options, which offer the buyers the right to sell the underlying security at a set date. With this background in mind, let’s dive right into the TipRanks’ Options Tool and see what’s in store for you.
Unlocking Trading Opportunities with TipRanks’ Options Tool
To navigate to the Options Tool for any stock, click on “Options” on the left navigation panel of the stock. You can find the tool right below the Technical Analysis tool and above the Chart tool. For the sake of clarity, let us take the live example of the American bank JPMorgan Chase (NYSE:JPM), whose earnings results for Q2FY23 are approaching soon. Once you are on JPM’s Options page, you can see the following details.
At the top of the page, you will see the Next Earnings Date for the stock. Earnings season is one of the best times to trade in options, as there is huge, expected volatility around the time of such important announcements. Traders usually consider the expiration date of the options contract, which is closest to the earnings date (on or the day after the earnings date). This is because options premiums tend to rise as the date of earnings approaches, thanks to the anticipation and uncertainty surrounding the earnings.
Next, you will see the Expected Earnings Move, both in percentage and dollar terms. The “Expected Move” reflects the projected price range within which the stock is expected to fluctuate after the earnings announcement. The expected move is calculated by dividing the at-the-money straddles of the options closest to the expiration date. An “At-The-Money” (ATM) straddle is a specific type of options trading strategy that involves simultaneously buying a call option and a put option with the same strike price and expiration date.
The total of the last call traded and the last put traded are added together, which gives you the dollar amount of the expected move or premium (in this case, $4.38). This figure is then divided by the most recent closing stock price (in this case, $145.15). The resultant figure gives you the expected move in percentage terms, which is +/- 3.02%. The expected move also means that JPM’s stock price could move up or down by 3.02% after the earnings announcement.
As you scroll below, you can see three drop-down tabs that allow you to sort the data at your convenience.
The first is the Expiration Date, which is set based on weekly (w) and monthly (m) expirations. You can select the expiration date for which you wish to see the data. Next comes the Strikes, under which you can select the number of strikes you wish to see for the particular expiration date. You can select between 5 Strikes +/-, 10 Strikes +/-, 20 Strikes +/-, 50 Strikes +/-, or All Strikes. And finally, you can choose Table View, which allows you to decide whether to see the details of Calls and Puts Side by Side or Stacked (vertically).
Below this drop-down, you will see a table giving details about the different strike prices and trades carried out for the options on the particular expiration date. For convenience, we have chosen an expiration date of July 14 for JPM, with 5 Strikes +/- and a Side by Side table view. The table displays the same set of data for both Calls and Puts.
Terminology
- Last Price – The last traded price of the options contract.
- % Change – The percentage change reflects the difference in option value compared to the previous end-of-day closing price.
- Volume – Volume represents the total number of options contracts traded today or as of the last trading day.
- OI – The Open Interest (OI) is the total number of outstanding options contracts in the market. This represents the level of liquidity and market participation for the contract. The higher the OI, the better, as it gives more trading opportunities and efficient pricing.
- Last Trade – The Last Trade gives you the details of the time and date of the last traded contract.
- Strike Price – The Strike Price in an options contract is the predetermined price at which the underlying security can be bought or sold once exercised. The strike prices are typically set above or below the current market price of the underlying security at regular intervals.
Summary
Options trading comes with a host of benefits, including a low cost of trading, limited risk, flexibility, and leverage. The TipRanks Options tool has all the relevant information about options contracts that can help you make timely trading decisions.
What’s more, you can add the research and knowledge from the several unique tools offered by TipRanks and improve your investment strategy. By making the information and tools easily available to retail investors, TipRanks continues on its journey of empowering investors with all the information that was once available only to institutional investors. So, come and join the TipRanks platform and make educated investment choices.
