The Options Chain: Why Everyone Gets Confused
There are endless amounts of options tutorials on the market, both free and those that come at a cost. By itself, YouTube has thousands of options videos for curious investors to learn about basic Options Concepts, the Greeks, Implied Volatility, the Options Chain, etc. Some investors spend over 100 hours trying to put it all together.
And yet most investors are confused
What's the Problem
No matter how much time you spend watching any of these videos, listening to these online "gurus" without real credentials, or even accessing education distributed by the Options Industry, you will end up at the same place as everyone else, beginner or expert, asking the same questions.
Unfortunately, most investors can't answer these questions and wind up guessing at the answers. Guessing with options is a sure-fire way to lose money.
Where? And what are the questions?
The Options Chain
IF you get through all the education, which includes the Greeks and Implied Volatility, then you will end up here at the Options Chain:
This is a basic Options Chain.
Everyone ends up on the Options Chain because this is where you see the prices of the options for any particular stock, strike price, and date. All options chains look fairly similar.
Immediately, upon looking at an Options Chain, most investors feel tension. They should.
Besides all the numbers being thrown at you, this is where you'll make the decision to buy or sell an option, and absorb all the risks that come along with using an option. Why wouldn't you feel some tension?
Another way to describe the tension is this way:
The definition of "Opportunity"on Wall Street can be defined as a situation where your expectations differ from the market's expectations.
Now, the prices you see on this Options Chain are market prices. And market prices have expectations embedded in them. What are those expectations?
First, let's define what is expected from you. Your Expectations need a:
- Target Stock Price
- Time needed to hit that Target Stock Price
- Some level of Confidence
Again, Your Expectations are only half of the equation. In order to figure out if and where there is opportunity on the Options Chain, you need to clearly know the Market's Expectations.
Of course, just by looking at the Options Chain, it's quite evident that hasn't happened. Not knowing the Market's Expectations embedded in each of those prices is what causes the underlying tension.
What does "Cheap" mean?
You see, the basic question you have when you buy or sell anything hinges on relative value. In other words, you're asking yourself if it's "cheap" or "expensive?" Or which is more valuable?
- Do I want to buy this house or that house?
- This car or that car?
- This book or that one?
You answer these questions by comparing one object to another. The easiest way to do that is price. For example, this car cost more than that car. Unfortunately, with options you can't do that. Price alone does not determine "cheapness." For example, just because one option's price is less than another doesn't mean it is "cheaper." It simply means the obvious, that it cost less money. When using options, "cheap" means something different.
So, if it isn't price then what is it?
First, I want to establish the fact that the standard Options Chain does not offer you anything to COMPARE one option versus another option.
Second, if you can't compare one option versus another, then how can you determine whether one option is better, "cheaper," or more valuable than the other?
You see where the confusion starts?
What I have described to you has been "the riddle, wrapped in a mystery, inside an enigma" that the Options Industry has been struggling with since the Black-Sholes formula was revealed in 1973. But as Winston Churchill continued... "perhaps there is a key."
That key is Mathematical Edge.
The New Options Chain
Mathematical Edge is (only) a 300 year-old concept that is used by anyone trying to win a probability game.
Now, let me make this clear...
For 99% of investors, Options isa probability game.
OptionsGeek has infused Mathematical Edge into the Options Chain for the first time to make it simpler and easier for you to see the Market's Expectations and to better determine the relative value of an option by comparing Your Expectations.
And by using Your Expectations, this New Options Chain also triangulates the option that maximizes the risk reward. Essentially, it tells you which option you should buy.
Finally, the New Options Chain highlights the area where the best in the world buy options to help you start thinking and investing like the Top 1%.
The New Options Chain is a game-changer.
It takes out all the guesswork, does all the analysis, and allows all investors to refocus their attention toward the winning stock idea and away from simple options questions that never had an answer.