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What is an Option Series?

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  • Written By: K.M. Doyle
  • Edited By: W. Everett
  • Last Modified Date: 07 November 2016
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In the stock market, an option series is group of calls or puts on a particular security, all of which have the same expiration date and the same exercise price. As an example, calls for ABC common stock at $15 US Dollars (USD) per share that expire on 15 June 2010 would comprise an option series. To be considered part of the option series, the options must be identical in option type, share class, maturity month, and exercise price.

A call is an option to purchase a specific number of shares of a specific security, at a given price, at some point in the future. A put is an option to sell a specific number of shares of a specific security, at a given price, at some point in the future. Calls and puts, collectively called options, do not obligate the owner to exercise the option, but they give him the option to do so.

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An investor may purchase an option series to provide more flexibility in exercising the options. If an investor purchases multiple options in a series, he can exercise one option and keep the others. This strategy would be useful if, in the case of a call option, the price of the underlying security goes up, but the investor suspects it may continue to go up. He may exercise one option in the series to take advantage of the price increase, yet keep the remaining options. He can then exercise the remaining options if the price of the security continues to go up, or let them expire if the price of the security remains flat or decreases.

Conversely, an investor may purchase an option series of puts because he expects the price of the underlying security to decrease. Once the price begins to decline, he can exercise a put in order to cover his costs of purchasing the option series. Because he has already covered his costs, he will only profit if the price of the underlying security continues to decline. He can exercise his remaining options if the price continues to go down, or he can allow them to expire.

While the option series is made up of all of the options for a particular security that are identical in type, share class, maturity date, and price, an investor need not purchase all of the options in the series. An investor will purchase only as many options as he chooses. He can then exercise those options as a group or individually, depending on his objectives and the movement of the stock price.

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