Now that you're well on your way to understanding the core concepts of options, it's time to discuss the mechanics of placing an options trade. When trading options, the decisions you'll make and the steps you'll take to buy or sell are different from those of stock trading. The focus of this lesson is to examine these unique qualities so you can understand how options trading works.

We'll begin with an introduction to the option chain. The option chain is a tool you can use when selecting an option to buy or sell. An option chain displays information about available options and, in many trading platforms, is an interactive element used for buying and selling options. An option chain is essentially a series of tables. Each table corresponds to a different expiration. The information contained in each table provides details for all the available options at that expiration.

Let's give you the tour. Often, a list of expiration dates is the first item on an option chain. Each expiration can be expanded to view the options for that expiration. Here are some common expiration categories you might see:

• Standard options: Options that expire on the third Friday of a month.
• Weekly options: Options that expire on Fridays other than the third Friday. These options are typically only available on highly traded underlying securities.
• Quarterly options: Options that expire on the last trading day of a quarter (in March, June, September, and December).
• LEAPS^®: LEAPS is an acronym for Long-term Equity AnticiPation Securities. These are options with an expiration longer than one year and are typically available on highly traded underlying securities. Note that in some trading platforms, LEAPS options are not labeled as such, but you can identify them by the length of their expiration.

The chart below illustrates how some of these options might look.

If you expand an expiration date, you can view information about each strike within that expiration. Information about calls is on the left, information about puts is on the right, and strike prices are in the center.

Each row in the option chain represents options at each of the strike prices that are available within the expiration. In-the-money options are shaded. Note that the same columns are listed on both the calls and the puts sides of the table. This is because calls and puts are totally separate contracts, even if they have the same expiration and strike. Therefore, the information listed on the left is different than the information on the right.

The columns in an option chain can often be customized to provide a wealth of information about the available options. For example, in the option chain shown below, you can see the options greek delta is included. This is one way to customize the option chain. However, the prices for the options are two pieces of information that are always included. Each row lists both the bid and ask prices for both calls and puts.

For example, on the thinkorswim^® platform, the bid and ask prices are the areas you'll select to open a new order ticket and place a trade. If you're buying a long call or long put, select the corresponding ask price. If you're selling a short call or short put, select the corresponding bid price.

Option chains can be customized to display information about volume and open interest. Volume shows how many contracts were traded during the last session. The open interest column shows how many options contracts are currently open (meaning they've been bought or sold to open new positions but not exercised, assigned, or closed). Both volume and open interest can sometimes give information about the liquidity of an option. Options with higher volume and open interest tend to have lower bid/ask spreads and potentially greater liquidity.

An option chain can sometimes be customized to show intrinsic and extrinsic value. As you've learned, intrinsic value is the difference between the current price of the underlying stock and the strike price of the option, or simply, what the option would be worth if it expired today; extrinsic value is the time value of the option, which will melt away by expiration. Intrinsic and extrinsic value add up to equal the current price. Only in-the-money options have intrinsic value.

Let's look at one more piece of information contained on an option chain: last and net change. Last refers to the last price—the amount at which the option last traded. Net change calculates the difference between the current price and the previous trading day's closing price. For options that traded that day, net change is a quick way to tell whether the option increased or decreased in value since the previous day.

To recap, option chains are handy for not only seeing price quotes but also seeing how different factors—like time and implied volatility—are likely to affect the options premium as the underlying stock moves up and down. Traders can also use these chains to see current levels of implied volatility, days left to expiration, volume, open interest, the last trade price, and net change.