SISCO's Option World

View Option Heatmaps

Under contract month are two special cases: composite and daily summary. The composite represents the aggregate values for all options in all months currently trading. In the composite, the value of all puts/calls from all months is computed whereas the daily summary shows you each contract's value of puts/calls separately. The daily summary only shows you values for one day while the serialized view shows the values over the past month.

There are two views: a daily summary and a serialized view. The daily summary shows you all of the statistics for the day on one page while selecting an individual statistic will provide you with a serialized view. This serialized view allows you to see how the statistic has changed over the past month.

Each heatmap contains a list of every strike price from every contract traded and it shows you the changes from the previous trading day. The first heatmap shown will be today's or the most recent. If you would like to view heatmaps from previous trading sessions just select the previous button provided on the page to go back in time.

The reason it's called theoretical value and not the actual value is due to the fact that values on the graph only represent the value of the options if they were traded at a particular price. So as you move along the graph from left to right the value of the index increases, or the strike prices increase. The value of all options (puts and calls) is computed for each increase in the index's price along the axis. But of course the index closed at one particular price today. Whatever that price is determines the actual value of the options in the marketplace today. But that's not what this chart shows. These graphs show how the value of options changes as the index's price changes. This enables you to see in advance who the winners will be. So if the index increases in value you can see how much money will be made with calls, and conversely, if the index drops you can see how much money will be made by puts.

So while the left and the right side of each graph shows a lot of value, that value will not be realized until the market or index gets to that price. But as you will see, the index is usually in the middle where the values are lower. The large values near the extremes shows you which options, puts or calls, dominate the market. This can be useful in gauging sentiment. In essence these graphs show you how bullish or bearish investors are and perhaps this will help you in making smarter investment decisions.

For a general explanation of the computations, let's look at an example. If the index is at 100, the options in the money have value and those out of the money don't have any value (theoretically, they expire worthless until they are in the money). Calls with strike prices below 100 have value but puts with strike prices below 100 don't. Conversely, puts with strike prices above 100 have value and calls with strike prices above 100 don't have value. So these charts total the theoretical value of the options' open interest at each strike price and display their totals.

Now of course options out of the money do have value prior to expiration, but these prices are not used in the calculation of the theoretical values. The theoretical is computed by taking the difference between the strike price and the index's value which is different from the price quoted in the marketplace which contains a premium. These charts show the real worth of the options being traded today as if today were the expiration day.

1. Option volume - this shows you the day's option volume for each contract month.

2. Option volume dollar weighted value - this is computed by multiplying the last price by the volume for each strike price and totalling all calls and puts.

3. Open Interest - this shows you the number of contracts still be held by investors at the end of the day.

4. Open Interest Actual Value - this is computed by totalling the value of in-the-money calls and puts. The value of the option is determined by the closing price of the index relative to the strike price and not the last price quoted for the option. So many options may be worthless (out-of-the-money) today despite the fact that the last price of the option being greater than 0.

5. Open Interest Dollar Weighted Value - This is simply the number of contracts held by investors at the end of the day multiplied by the last price quoted. In this case, all open options are valued at today's prices.

6. Average Option Price - this simply divides the option volume dollar weighted value by the daily volume of puts/calls.

7. Average Open Interest Actual Price Price - this simply divides the open interest actual value by the open interest of puts/calls.

8. Average Open Interest Dollar Weighted Price - this simply divides the open interest dollar weighted value by the open interest of puts/calls.

9. Theoretical Value - this represents a hypothetical scenario. The theoretical value represents the actual value of all options at a specific index value. So the value of every option is computed based on the current open interest at each strike price and at the specific index value. For example, if the index were to drop 100 points the puts would increase in value and the calls would decrease in value. Conversely, if the index were to rise 100 points the calls would increase in value and the puts would decrease in value. But the number of calls is greater than puts than the theoretical value will increase at a faster rate for calls than puts. Conversely, if puts outnumber calls then put values would increase at a faster rate if the price drops. This theoretical value allows you to see which group stands to make more money if the index makes asignificant move.

Some argue that since most options expire worthless, the index will tend to gravitate to the lowest point in the graph because that represents the maximum amount of loss to both puts and calls. Another pessimistic interpretation is that if one side stands to make more than the other, the index will move in the direction towards the lowest value so that more money is lost. And another interpretation is that the index will move in the direction towards the most value. It is assumed that professionals use options and they are generally correct in anticipating future values.

10. Put/Call Ratios - this shows you several unusual ratios based upon values, open interest, and other quantities.

Now you can decide for yourself which theory is correct by viewing these statistics over time and seeing for yourself how reliable the option market is in forecasting future prices. However keep this in mind when you look at these statistics. What is the purpose of options? Why do they exist? Well, the answer is that they are generally used by professionals to hedge their positions. This means that they buy puts when the percieved risk of losses is greater than the potential gains. This allows them to lock in a profit while they unload their large positions. Conversely, if professionals think that the index will go higher they will buy calls to establish a position. They can use less money to control a large amount of stock and limit their loss if their timing is off. This is why options have been called insurance. It insures your gain if you own stock (buying puts) and it insures your loss if you don't own any stock yet (buying calls). The problem with all of this is knowing how many options are involved in the function of hedging/insurance or how many are buy and sold for just plain speculation.

You will be shown the most current heatmap and then if you would like to view the previous day's heatmap then click on the previous button provided on the page.

Unlike the option value and statistic pages, you can only view one heatmap (one day) at a time.