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Current time:0:00Total duration:3:30

Video transcript

here are some option quotes from cnbc.com and my goal here is to really just familiarize you with the quote so you know what you're looking at so the first thing to realize is that options are categorized by expiration dates so these options that I've listed right here are expiring in April 2011 and options expire they usually expire on the third Friday of any month or I guess it to be to be exact the third Friday of the month is the last day that you could trade them they officially expire the Saturday after that and these are options on GE the last stock quote it last traded at $18.95 and the way that it's listed on cnbc.com and it tends to be listed this way pretty much anywhere that you look at option quotes is that they list the calls on one side and then the puts on the other side and these are obviously calls and puts on General Electric and then they write the strike prices down the middle in increasing order so the first column this is just the symbol for that particular option this is the last trading price this is how much it's changed that day the low and the high give the range of trading that day on that option volume tells us how many options actually traded that day and open interest which is something that you're probably not familiar with if you've only looked at stock quotes tells us how many actual open options contracts of that type are actually in existence so if you look right over here this tells us that there's 399 open köppen call options with a 14 dollar stock strike price and in April 2011 the 2011 expiration on General Electric it tells us that none of those 399 open options actually traded that day if any of these 399 options get exercised then I'll go down to 398 if someone writes a new option then it'll go up to 400 and the way it's listed here is that the end the money options are listed in this light blue color and then the out of the money options don't get the light blue color and so you can see the in the money call options are the ones that have the strike price below below so today's current strike price because if you had a call option for 17 dollars that gives you the right to buy GE for 17 dollars and if you exercised it today you'd buy it at 17 and you could immediately sell that stock for 1895 so you would immediately make a dollar 95 profit and you can see right here that the stock is or the option I should say is actually trading a little bit above that and that's because it has the option ality you can definitely make a dollar 95 on it but you might want to keep it around because you can potentially get the upside on GE stock up to the third Friday of April 2011 while having a limited downside the most you could lose here is the price that you paid for your option and then you can see the put options that are in the money are the ones that have a strike price above the current trading price if I had a $20 if I had a put option with a $20 strike or $20 exercise price that means that I could go out into the market today buy the stock for $18.95 and then immediately sell it for $20 so I would make an immediate dollar 5 profit and you can see here that the option is trading for a little bit more than a dollar 5 because of the optionality