"What Is Contract Range?"
Question By Chaz
"What does the term "contract range" mean in options trading? "Asked on 16 January 2009 |
Answered by Mr. OppiE
Hi Chaz,
Contract range in options trading is the difference in the highest and lowest price a particular options contract has filled at within a specific period of time. It gives you an idea as to how wide a range the particular options contract has traded in.
For example, If XYZ company's January $50 Call Options has filled at $1.80, $2.50, $3.50, $1.50, then its contract range is $3.50 - $1.50 = $2.00.
Contract range is not a piece of information most options traders require, especially retail options traders, because stock options are derivatives
that moves as its underlying stock moves. It's price does not move only when it is being traded. This means that the highest and lowest possible price for that
options contract may actually be wider than its contract range. Contract range is most applicable in other financial instruments such as
Range Forward Contracts in currency trading.
In conclusion, if there is any other options terms that you may wish to know the meaning to, please refer to our Options Trading Glossary.
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