Newspaper Quotes

Many newspapers carry option quotations. In The Wall Street Journal, stock option quotations can currently be found under the heading "Listed Options" in the Money and Investing section. Table 6.1 shows the quotations as they appeared in The Wall Street Journal of Friday October 18, 1991. These refer to trading that took place on the previous day (i.e., Thursday, October 17, 1991).

The company on whose stock the option is written together with the closing stock price is listed in the first column. The strike price appears in the second column. The next three columns show the prices of the call options with the closest three expiration months. The last three columns show the prices of the put options with the closest three expiration months. Since at least four expiration months are active at any given time, The Wall Street Journal does not provide quotes on all available options at any given strike price. The letter r indicates that the option was not traded on October 17, 1991. The letter 5 indicates that the option is not offered by the exchange.

The quoted price is the price of an option to buy or sell 1 share. As mentioned earlier, one contract is for the purchase or sale of 100 shares. A contract therefore costs 100 times the price shown. Since most options are priced at less than $10 and some are priced at less than $1, individuals do not have to be extremely wealthy to trade options.

From Table 6.1, it appears that there were arbitrage opportunities on October 17, 1991. For example, an October call on Dow Chemical with a strike price of 50 could be bought for 2. Since the stock price is 52it appears that this call could be purchased and then exercised immediately for a profit of g. In fact, these arbitrage opportunities almost certainly did not exist. For both options and stocks, Table 6.1 gives the prices at which the last trade took place on October 17, 1991. The last trade for the October Dow Chemical call with a strike price of 50 almost certainly occurred much earlier in the day than the last trade on the stock. If an /option trade had been attempted at the time of the last trade on the stock, the call ' price would have been higher than 2|.

TABLE 6.1 Stock Option Quotations from The Wall Street Journal, October 18, 1991

Thursday, October 17,1991

Options closing prices. Sales unit usually is 100 shares. Stock close is New York or American exchange final price.

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