9d • 💻 Technical Skills
Option Contracts for Crude Oil
A new video has been added to the online course 5.20 in the Classroom. This video explains what an option chain is.
An option is a contract that gives its owner the right to buy or sell an asset (it is called 'underlying asset') such as WTI crude oil (in this example) at a fixed price (called 'strike price') by a certain date when the option expires.
The underlying asset is WTI Crude in this case . WTI stands for West Texas Intermediate. It is the main crude oil benchmark in the United States. When you hear "oil prices" in American news, they're usually referring to WTI.
Crude oil is unrefined petroleum extracted from the ground.
Its spot price is $78.5/barrel. The spot price changes every second.
An option chain is a set of options having the same underlying asset. In this case, the chain has a set of 5 call options has the same underlying asset i.e. WTI Crude.
So in this video WTI crude oil is trading at $78.50 per barrel. We have five options with different strike prices: $70, $75, $80, $85, and $90.
I explain what these numbers mean and how they form an option chain.
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Option Contracts for Crude Oil
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