I have been doing research on Options and thus far most of it has been relatively theoretical (mainly pricing models and put/call hedging strategies).

Recently I have been looking into actually buying options contracts and I am very confused.

I had assumed that with options you could go to a website that quotes financial instruments and it would give you the strike price, premium/(initial cost of buying the option) and the expiration date.

Instead when I search, for example the VIX option on the CBOE website I get the following:

enter image description here

Can someone please explain how to equate the values in the tables above into strike price and premium/(initial cost of buying the option) ?


This is exactly how I started, starting a simulation account on the CBOE website just to see what situation was profitable because it was all greek to me. Actually after learning the greeks, I realize that site was worse and eventually read some books and got better tools.

The screenshot you have is telling you the strikes, but unfortunately they are showing you the technical name of the contract on the exchanges. For example, just like you type in AAPL to buy shares of AAPL stock, you can type in VIX1616K16E to get that one particular contract, expiration and strike.

So lets break it down just by inferring, because this is what I just did with that picture: You know the current price of VIX, $17.06

Calls expiring November 16th, 2016:

VIX / 16 / 16 / K16 / E - more expensive

VIX / 16 / 16 / K17 / E - less expensive

VIX / 16 / 16 / K18 / E - even less expensive

What is changing?


So knowing that in the money options will be more expensive, and near the money options will be slightly cheaper, and out the money will be even cheaper, you can see what is going on, per expiration.

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