Options Trading Tutorial

what's the formula for determining strike price intervals in options.?

Suppose a range for a share is between 50 & 250. Then how we ll determine the strike price intervals for that scrip in options.

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1. Physical Settlement When an option that is physically settled is exercised, the option holder buys (with call options) or sells (with put options) the underlying asset from the option writer at the strike price. With physical settlement the underlying asset or security actually changes hands, and a payment (in the amount of the strike price) for the asset is also exchanged. Some examples of physically settled options are: stock options, currency options, bond options, commodity options, and futures options. Cash Settlement When a cash settled option is exercised the option holder will receive a cash payment which is determined by a formula. The formula for determining the settlement of an index call option is: Exercise-settlement amount = (Closing index level on day of exercise - Strike price) x Multiplier x # of contracts. Some examples of cash settled options are: index options, interest rate options, and swaptions. Settlement Type * Physical Cash Stock Options Index Options Commodity Options Interest Rate Options Bond Options Swaptions Currency Options 3-D Currency Options Futures Options * This table shows the typical type of settlement of several types of options, however there are some exceptions. For contract specifications visit the "products" link on the options exchange the contract trades on.
2. For equity options, the usual formula given by the Options Clearing Corporation (OCC) is "Strike Price Intervals: 2-1/2 points for stocks trading below $25, 5 points for those trading from $25 to $200, and 10 points for those trading above $200." However, the usually formula is not always used. Some lower priced stocks use $1 intervals. Strike prices may be adjusted due to splits, mergers, spin-offs, or special dividends. Finally, anyone can ask for an additional strike price to be added. With all the exceptions any formula would be inaccurate some of the time. To get accurate information you need to get an options chain from reliable source, such as the CBOE, and extract the strike prices from the results. The URL you can use to get option chains from the CBOE is http://www.cboe.com/DelayedQuote/QuoteTable.aspx