Options Contract Explained: What You're Buying

By the RadarPulse Markets Team

An options contract is a legal agreement that gives you the right, but not the obligation, to buy or sell 100 shares of a stock at a specific price on or before a specific date. You pay a premium upfront for that right. Understanding each term in a contract is the first step to understanding options.

The five fields of an options contract

Every options contract is defined by five terms. Each one affects the price and risk of the position.

A typical options ticker reads: AAPL 250718C00190000. Breaking it down: AAPL is the underlying, 250718 is the expiration (July 18, 2025), C means call, and 00190000 encodes the $190 strike.

Calls vs. puts

A call gives you the right to buy 100 shares at the strike price. You profit when the stock rises above the strike plus the premium you paid.

A put gives you the right to sell 100 shares at the strike price. You profit when the stock falls below the strike minus the premium you paid.

The 100-share multiplier

Every standard equity options contract controls 100 shares. The premium is quoted per share, so always multiply by 100 to get the actual dollar cost.

If an AAPL $190 call is quoted at $3.50, you pay $350 for one contract. If the stock rises to $200 and the option is worth $12.00, selling to close returns $1,200, for a $850 gain on a $350 investment.

This multiplier works in both directions. A contract losing $2.00 in value costs you $200.

Strike price

The strike is the price anchored into the contract at the time you open the position. It never changes, regardless of where the stock trades.

Strike prices are set by exchanges in standard increments, typically $1 for low-priced stocks, $5 or $10 for higher-priced ones. For heavily traded names like SPY or AAPL, $0.50 and $1 strikes are available across many expirations.

The relationship between the strike and the current stock price determines moneyness: in the money (has intrinsic value), at the money (strike equals current price), or out of the money (no intrinsic value yet).

Expiration date

Options expire on a specific date. For standard equity options, expiration falls on the third Friday of the month, though weekly expirations (every Friday) and daily expirations exist for popular underlyings like SPY and QQQ.

After the expiration date, the contract ceases to exist. It either gets exercised, or it expires worthless. You cannot extend an options contract once it expires.

Time is always working against option buyers. Every day that passes reduces the time value component of the premium, a process called theta decay.

Premium: what you actually pay

The premium is the price of the contract. It has two components:

• Intrinsic value: how far in the money the option is right now. A $190 call with the stock at $195 has $5 of intrinsic value.
• Time value (extrinsic value): the additional amount reflecting time remaining and implied volatility. An out-of-the-money option is made entirely of time value.

Premium = intrinsic value + time value. As expiration approaches, time value decays toward zero.

Buyer vs. seller

Every options contract has two sides.

• The buyer (holder): pays the premium, holds the right to exercise or sell to close. Maximum loss is the premium paid.
• The seller (writer): collects the premium, takes on the obligation to fulfill the contract if the buyer exercises. Losses can exceed the premium collected for naked (unhedged) short positions.

For every buyer there is a seller. Open interest tracks the total number of open contracts outstanding at any given time.

Exercise vs. sell to close

Most options traders never exercise. Instead they sell the contract to another trader before expiration. Selling to close captures both the intrinsic value and any remaining time value. Exercising surrenders the time value.

Auto-exercise at expiration applies to contracts that are at least $0.01 in the money. If you hold an in-the-money option through the expiration deadline (5:30 PM ET on expiration day), your broker will exercise it automatically.

American vs. European style

American-style options (most equity options) can be exercised at any time before expiration. European-style options (most index options like SPX) can only be exercised at expiration. Both can be bought and sold in the secondary market at any time.

Key takeaways

• One contract controls 100 shares. Multiply the quoted premium by 100 for the dollar cost.
• Calls give the right to buy; puts give the right to sell.
• The strike price is fixed at contract open and never changes.
• Premium = intrinsic value + time value. Time value decays to zero at expiration.
• Buyers risk only the premium; sellers can lose more if unhedged.
• Most traders close positions by selling to close rather than exercising.

This page is educational and does not constitute financial advice. Options trading involves risk of loss.

The lifecycle of an options contract: from open to close

An options contract does not simply appear and vanish at expiration. It passes through a well-defined series of stages, each with its own mechanics and decision points. Understanding the full lifecycle keeps you from being surprised by what happens when a position moves against you, rolls into expiration, or gets assigned without warning.

Stage 1, Order entry. When you buy an options contract, your broker routes a buy-to-open order to an exchange specifying four things: the underlying security (e.g., AAPL), the expiration date, the strike price, and whether you want a call or a put. If you are selling to open, writing a covered call, for example, the order type is sell-to-open. These order type designations matter for bookkeeping because they tell the exchange and the OCC (Options Clearing Corporation) whether your trade creates a new open position or closes an existing one.

Stage 2, Market maker fills the order. On the other side of most retail options trades is a market maker, a firm or algorithm that quotes both a bid and an ask and takes the opposite side of customer orders. If you buy to open a call, the market maker sells to open that call and is now short the contract. They immediately hedge their exposure using the underlying stock or a basket of other options, so they are rarely making a directional bet. The fill creates a binding agreement enforced by the OCC, which steps in as the central counterparty, meaning you do not bear credit risk from the specific firm on the other side of your trade.

Stage 3, Open interest increases. Once the trade settles, the OCC records both sides. Open interest, the total number of outstanding contracts in that specific option, increases by one. If you and the market maker each hold one new contract, one contract has been added to the open interest count. Open interest is reported the following morning and is updated daily, unlike volume, which resets to zero at the start of each session.

Stage 4, Active management during the life of the contract. While the contract is alive, the holder has three choices. The most common is sell-to-close, selling the contract back into the market before expiration to capture the remaining premium. This is the cleanest exit because it captures both intrinsic value (if any) and any residual time value. The second choice is exercise, calling the shares or putting the shares at the strike price. Exercise usually makes sense only for deep in-the-money options or when capturing a dividend (for calls). The third choice is inaction, which leads to Stage 5.

Stage 5, Expiration. At expiration, the OCC applies automatic exercise to any contract that is at least $0.01 in the money (the standard threshold for retail customers under OCC rules). An in-the-money call results in the call holder buying 100 shares at the strike price; an in-the-money put results in the put holder selling 100 shares at the strike price. Options that expire out of the money or exactly at the money are not exercised and simply cease to exist. Near-the-money options create what traders call "pin risk", uncertainty about whether the contract will expire just in or just out of the money, because assignment is unpredictable when the stock closes very near the strike.

Despite what beginners expect, the vast majority of options contracts never reach the exercise stage. Industry data consistently shows that roughly 70 to 80 percent of contracts are closed before expiration (sell-to-close or buy-to-close by the writer), around 15 to 20 percent expire worthless, and only a small single-digit percentage are exercised. The math is straightforward: exercising an option surrenders the remaining time value. Selling the contract keeps that time value in your pocket, which almost always produces a better result.

Options contract specifications: what every term means

A listed options contract is a standardized legal document. Every field is defined in advance by the exchange, and no two traders can negotiate custom terms. Standardization is what makes secondary-market liquidity possible, anyone can trade any contract because the terms are identical for every holder. Here is what each specification field means and why it matters.

Underlying. The underlying is the security the option is based on. For equity options this is a specific stock (AAPL, TSLA, SPY). The option derives all of its value from the price of this security. Options also exist on ETFs, equity indices (SPX, NDX), volatility indices (VIX), futures, and foreign currencies, each with its own quirks, but the core contract mechanics remain the same.

Multiplier. Standard US equity options have a multiplier of 100, meaning one contract controls 100 shares. This multiplier is built into every price quote. When a broker displays a premium of $4.20, the actual cost per contract is $420. The multiplier is set by the OCC and is the same for virtually every US equity option. Some index options use different multipliers, SPX options have a $100 multiplier but are cash-settled, effectively making them worth 100 times the index point value.

Strike price. The strike is the contractually agreed-upon price at which shares change hands if the option is exercised. Strikes are set by exchanges in standard increments. For most stocks priced below $25, strikes are in $1.00 increments. Stocks priced $25 to $200 typically see $2.50 and $5 increments. Heavily traded names like AAPL, SPY, and QQQ have strikes in $0.50 or $1.00 increments across nearly every expiration. The selection of available strikes is called the strike ladder, and exchanges add new strikes as the underlying moves significantly.

Expiration. Options are time-limited instruments. The four major expiration cycles are: monthly (third Friday of each month, the original standard); weekly (every Friday, introduced in 2005 for SPY and expanded widely); quarterly (the last business day of March, June, September, December); and LEAPS (Long-Term Equity AnticiPation Securities), which are standard monthly contracts with expirations one to three years out. The further out the expiration, the more time value (and therefore premium) the option carries.

Type, call vs. put. A call grants the right to buy; a put grants the right to sell. The type determines the direction of your exposure. Long calls profit from upward moves; long puts profit from downward moves. The payoff profiles are mirror images of each other, offset by the premium paid.

Style, American vs. European. American-style options can be exercised at any point before expiration. This is standard for equity options and most ETF options. European-style options can only be exercised at expiration, you cannot call the shares early even if it would be profitable to do so. Most broad index options (SPX, XSP, RUT) are European-style. Both styles trade freely in the secondary market regardless of exercise restrictions, you can sell an SPX option before expiration without ever exercising it.

Settlement, physical vs. cash. Physical settlement means actual shares change hands when the option is exercised. This is the standard for equity and ETF options. Cash settlement means no shares change hands, instead, the holder receives (or pays) the cash equivalent of the in-the-money amount times the multiplier. SPX, VIX, and most index options settle in cash, which simplifies exercise and eliminates the need to fund a stock purchase. Cash-settled index options also avoid "pin risk" near expiration because settlement uses the official opening price of the expiration morning rather than the closing price.

Premium. The premium is the market price of the option at any given moment. It is quoted per share, so the total cash outlay is always premium times 100 for a standard equity option. Premium fluctuates continuously as the underlying moves, volatility changes, and time passes. The premium you pay to open is your maximum possible loss as a buyer; it is the maximum possible gain for the seller.

Reading an options contract symbol (OCC symbology)

Every listed options contract has a standardized ticker symbol defined by the OCC. The format was introduced in 2010 to replace the older, inconsistent symbology that had run out of characters to encode all available strikes. Today's OCC symbol encodes every critical field of the contract in a single 21-character string, making it machine-readable and unambiguous.

The format is: [Root][YY][MM][DD][Type][Strike x 1000].

Here is a worked example: AAPL230120C00150000

• AAPL, the root symbol (up to 6 characters, left-padded to 6 with spaces in some systems).
• 23, the two-digit year (2023).
• 01, the two-digit month (January).
• 20, the two-digit day (the 20th; this is a standard monthly third-Friday expiration).
• C, the type: C for call, P for put.
• 00150000, the strike encoded as an eight-digit integer representing the strike in thousandths of a dollar. 00150000 divided by 1000 = $150.00. A $155.50 strike would be encoded as 00155500.

Broker platforms almost never show the raw OCC symbol to customers. Instead, they display a human-readable abbreviated form: "AAPL Jan 20 2023 $150 Call" or "AAPL 1/20/23 150C." The abbreviated display varies by platform, but the underlying OCC symbol is always the authoritative identifier used by the exchange, the OCC, and clearing firms.

LEAPS use the same symbology but with year digits two or three years in the future. A AAPL call expiring January 2026 would carry the year digits "26" and would otherwise look identical to a short-dated contract. The date field alone determines whether a contract is a weekly, monthly, or LEAP, there is no separate category in the OCC symbol.

Understanding the OCC symbol matters most when you are verifying order confirmations. A common and costly error is selecting the wrong expiration or the wrong strike from a crowded options chain. Scanning the raw OCC symbol on your order confirmation before submitting is a reliable sanity check because every field is explicit. For example, 00200000 and 00020000 look similar on a fast read but represent $200 and $20 strikes respectively, a tenfold difference that can turn a routine trade into an unintended position.

When searching for options data programmatically, via a broker API, market data provider, or a platform like RadarPulse, the OCC symbol is the universal key. Passing the full OCC symbol eliminates any ambiguity that can arise when date formatting conventions differ between systems (e.g., MM/DD/YYYY vs. YYYY-MM-DD).

How options contracts are priced: intrinsic vs. extrinsic value

The premium you pay for an options contract is not a single homogeneous number. It is the sum of two distinct components: intrinsic value and extrinsic value (also called time value). Understanding the split is essential for evaluating whether an option is expensive or cheap, how your position will behave over time, and why most options lose value even when the underlying stock sits still.

Intrinsic value is the amount by which an option is in the money right now. It is a mechanical calculation with no ambiguity:

• For a call: intrinsic value = max(stock price − strike price, 0)
• For a put: intrinsic value = max(strike price − stock price, 0)

If AAPL is trading at $150 and you hold a $145 call, the intrinsic value is $5.00 ($150 − $145). If you hold a $155 call with AAPL at $150, the intrinsic value is zero, the option is out of the money and has no immediate exercise value. An option's intrinsic value can never be negative.

Extrinsic value is everything else in the premium beyond the intrinsic value. It is the portion of the price you are paying for time, uncertainty, and the possibility that the stock will move favorably before expiration. Extrinsic value is driven by three forces: (1) time remaining to expiration, more time means more opportunity for the stock to move, so more premium; (2) implied volatility, the market's expectation of how much the stock will move, higher IV means higher premium; (3) distance from the strike, options exactly at the money have the highest extrinsic value relative to their premium because there is maximum uncertainty about which way they will finish.

Worked example. AAPL is at $150. Consider two calls:

• $145 call, premium $8.00: intrinsic = $5.00 ($150 − $145); extrinsic = $3.00 ($8.00 − $5.00). The $3 extrinsic reflects time remaining and implied volatility.
• $155 call, premium $3.00: intrinsic = $0 (out of the money); extrinsic = $3.00 (100% of the premium is time value). If AAPL never rises above $155, this entire $3.00 evaporates by expiration.

At expiration, extrinsic value is exactly zero. No time remains, no uncertainty remains, the option is worth either its intrinsic value or nothing. This is why theta (the Greek letter measuring time decay) is always negative for option buyers: every passing day burns away a portion of the extrinsic value whether the stock moves or not. Near expiration, this decay accelerates sharply, particularly in the final two weeks of a contract's life.

Implied volatility compresses or expands the extrinsic value without changing the intrinsic value. When a company announces earnings, IV typically spikes because the market expects a large move, the extrinsic value of near-term options rises substantially. After the announcement, IV collapses even if the stock moved exactly as expected, causing the extrinsic value (and therefore the premium) to drop sharply. Traders call this the "IV crush." Buying options into earnings and holding through the announcement is often a losing strategy even when your directional call is correct, because the collapse in extrinsic value offsets the gain from the move.

Options contract lot sizes and position limits

The 100-share multiplier is not arbitrary, it was set when options markets were standardized in the 1970s to represent a round lot of stock. Round lots (100 shares) were the standard unit of equity trading, and options were designed to hedge or speculate on exactly one round lot. The multiplier has remained 100 for virtually all standard US equity options ever since, which means every price quote, every greeks calculation, and every P&L figure you encounter is implicitly scaled by 100.

Mini-options. The CBOE and other exchanges have experimented with mini-options, contracts representing 10 shares rather than 100. Mini-options were introduced in 2013 for a small number of high-priced underlyings including AAPL and Google (before their stock splits made standard lots more accessible). In practice, mini-options attract very little trading volume and have wide bid-ask spreads, making them costly to trade. Most retail platforms do not actively promote them, and institutional traders rarely use them. For nearly all practical purposes, 100 shares per contract is the universal standard.

Position limits. The CBOE and OCC impose position limits, the maximum number of contracts in a single underlying that one entity can hold on the same side of the market (long calls and short puts count as the same side; long puts and short calls count as the other). Position limits exist to prevent any single actor from cornering the market in a specific underlying. For most individual stocks, the limit is 25,000 contracts on one side. For very large, highly liquid names (SPY, QQQ, AAPL, TSLA), limits can be much higher, sometimes 250,000 contracts or more, because the underlying market is deep enough to absorb large positions.

Position limits have a direct consequence for flow monitoring. A large institution taking a significant position in a high-conviction name may want to buy far more than 25,000 contracts in any single expiration or strike. To work around the limit while staying within rules, they fragment the order across multiple expirations, multiple strikes, and sometimes multiple accounts. This creates a pattern of related orders that look different on the surface but represent a single thesis. RadarPulse's confluence detection looks for clusters of prints across similar strikes or expirations in the same underlying within a short time window, because fragmented institutional orders leave exactly this footprint on the tape.

The total premium of a fragmented institutional order can be enormous even when each individual contract block stays under position limits. A 5,000-contract block on a $5.00 premium option represents $2.5 million in total premium. An institution filling 25,000 contracts across five expirations at that premium represents $12.5 million deployed in options on one underlying, a directional bet of institutional scale. Understanding lot sizes and position limits helps calibrate the significance of what you see when a large print or a cluster of prints appears in the flow.

Contract adjustments: when options change specifications

Options contracts are written with a specific underlying and specific terms, but those terms are not always permanent. Corporate events can force the OCC to adjust outstanding contracts to preserve their economic equivalence before and after the event. These adjustments are one of the less-discussed mechanics of options trading, yet they catch traders off guard regularly, especially those holding options in names undergoing significant corporate activity.

Stock splits. When a company executes a stock split, the OCC adjusts all outstanding options contracts to reflect the new share price. In a 4-for-1 split, each share is worth one-quarter of its pre-split value, so each option contract must be adjusted to maintain the same total economic value. The adjustment multiplies the contract count and divides the strike price by the split ratio. A $200 strike call becomes a $50 strike call, and the contract now covers 400 shares (instead of 100) to preserve the dollar value of the position. Alternatively, depending on how the OCC structures the adjustment, new contracts may be issued at the new strike with the standard 100-share multiplier while the old contracts are closed. Post-split adjusted contracts can be illiquid because the new terms are non-standard, and market makers are often reluctant to quote tight markets in them.

Mergers and acquisitions. When an underlying company is acquired, its options may be adjusted to deliver the acquirer's stock, a cash payment, or a combination. If the acquisition is an all-cash buyout at $150 per share and the call's strike is $130, the call becomes exercisable for $20 cash (the difference between the buyout price and the strike). The option no longer moves with any underlying stock price because the deal is fixed, its value collapses to the merger consideration minus the strike, and it stops responding to market events. Holding options in a merger target can produce unexpected outcomes if the deal terms differ from your assumption.

Special dividends. Large special dividends (typically above a threshold set by each exchange) trigger contract adjustments because the dividend causes the stock price to drop by the dividend amount on the ex-date, which would otherwise reduce the value of call options and inflate put options unfairly. The OCC adjusts the strike price downward by the dividend amount. A $100 call with a $10 special dividend becomes a $90 call after the adjustment, preserving the call holder's economic position. Ordinary quarterly dividends are generally small enough that no adjustment is made, the dividend is considered already reflected in the option's premium via early exercise risk and the cost-of-carry model.

Practical implications. The best practice before entering a large options position in any individual stock is to check for announced or pending corporate events: declared mergers, upcoming split announcements, or special dividends. Sites like SEC EDGAR, Bloomberg, and your broker's corporate actions feed can surface pending events. If an adjustment occurs after you have entered a position, your broker's platform should show the adjusted terms on your position screen. Look for a notation like "(adjusted)" or a non-round share count (e.g., 133 shares instead of 100) as a signal that the OCC has modified the contract terms on your existing position.

Open interest, volume, and contract liquidity

Three numbers appear on every options chain: the bid, the ask, and the open interest. A fourth number, volume, appears when markets are open. Together they tell you how active a contract is, how easy it will be to exit, and whether a large options print represents new positioning or the unwinding of an existing trade. For flow analysis, these numbers are foundational.

Open interest is the total number of outstanding contracts in a specific option, calls and puts counted separately. Every contract in open interest represents one buyer and one seller who have not yet closed their positions. Open interest builds over time as new contracts are created and shrinks as existing contracts are closed, exercised, or expire. It is reported daily by the OCC and appears on option chains as of the previous night's settlement. Open interest is a useful measure of the overall market commitment to a given contract: high open interest means many participants hold that contract, which generally correlates with tighter bid-ask spreads and deeper markets.

Volume is the number of contracts traded during the current session. It resets to zero at the open of each day. Volume tells you how active a contract is right now. High volume with low open interest is a signal worth noting, it suggests that today's trading activity represents a meaningful new commitment relative to what was already outstanding, not just day-traders turning over existing positions.

The Vol/OI ratio is the measure RadarPulse weights most heavily in its conviction score (40% of the score). The ratio divides today's volume by the prior-day open interest. A ratio above 1.0 means more contracts traded today than existed yesterday, a sign of significant new positioning. A Vol/OI ratio of 10× or 20× in a low-open-interest option is a strong signal: the volume represents fresh directional commitment, not the rotation of existing holders. The most extreme cases, say, 5,000 contracts traded against 100 open interest, a 50× ratio, are the prints most likely to represent a single large institutional order opening a new position rather than market noise.

Bid-ask spread is the primary measure of liquidity and exit cost. The spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). For liquid options on names like SPY or AAPL, spreads on near-the-money contracts can be as tight as $0.01. For illiquid options on small-cap stocks or far-out-of-the-money strikes, spreads of $0.50 or more on a $1.00 option are common, meaning you immediately lose 50% of the option's value at the moment you buy it, even before the stock moves a penny. A useful rule of thumb: if the spread is more than 10% of the mid-price, the option is illiquid enough that entry and exit costs should be a primary consideration in your decision. Wide spreads also make it difficult to get fair fills on complex multi-leg strategies, since each leg's spread compounds the total entry cost.

When evaluating institutional flow, open interest provides critical context. A 10,000-contract print in a name with 500,000 open interest is a large order, but it represents 2% of the existing market, plausibly a hedge or a portfolio adjustment. The same 10,000-contract print in a name with 800 open interest is a different story: it is more than 12 times the existing open interest, strongly suggesting a new directional bet rather than a hedge or a close.

Tracking institutional contract flows: how large orders hit the tape

Institutional options orders do not arrive at the exchange the way a retail order does. A hedge fund, an investment bank, or a large proprietary trading firm placing a multi-million-dollar options bet faces a set of structural constraints, market impact, position limits, disclosure rules, that shape how the order gets executed. The resulting footprint on the tape is distinct, and recognizing it is the foundation of options flow analysis.

Block trades are large orders negotiated away from the public exchange order book before being printed to the tape. A buyer and seller, often facilitated by a broker-dealer, agree on price and size in a private negotiation, then report the trade to the exchange where it appears as a single large print. Because the price was agreed before the print, block trades do not move the market in the way a live order would. They appear on the tape as a sudden large-volume print, often at or near the mid-price of the bid-ask spread rather than at the bid or ask (since both parties agreed to split the spread in negotiation). RadarPulse identifies block trades by looking for large prints executed at prices inconsistent with aggressive sweeping, a mid-market fill on a print of 5,000+ contracts is a classic block signature.

Sweeps are aggressive market orders that fill immediately by "sweeping" the available liquidity across multiple exchanges at the best available prices. Unlike a limit order that waits passively for fills, a sweep is designed to fill the entire order size immediately, paying whatever price is needed to get done. A sweep on 3,000 contracts might fill 800 at one exchange, 1,200 at a second, 700 at a third, and 300 at a fourth, all within milliseconds, all at slightly different prices. On the tape, a sweep appears as a burst of prints in the same contract in rapid succession, often with the fills labeled as being executed on multiple exchanges. Sweeps signal urgency: the buyer is prioritizing speed of execution over price efficiency, which is a behavior consistent with a trader who believes their information has a short window before it becomes public.

RadarPulse scores both block trades and sweeps, but weights them slightly differently. Sweeps carry a directional urgency premium in the conviction score (sweep-vs-block factor accounts for 10% of the total score) because the willingness to pay up for immediate fills suggests the trader expects the information advantage to decay rapidly. A 1,000-contract sweep on short-dated calls, out of the money, with a high Vol/OI ratio and no obvious hedge structure is the archetypal EXTREME signal: size, urgency, direction, and new positioning all aligned.

Understanding that each contract controls 100 shares is essential for sizing institutional conviction. A 2,000-contract call sweep at a $3.00 premium represents $600,000 in total premium ($3.00 × 100 × 2,000). The notional exposure controlled by those contracts, if the underlying is at $150 and the delta is 0.40, is 2,000 × 100 × $150 × 0.40 = $12 million in delta-adjusted stock exposure. An institution deploying $600,000 in premium to control $12 million in effective stock exposure is expressing a high-conviction leveraged directional view. When RadarPulse surfaces this as an EXTREME print in the Top 25 leaderboard, the score reflects not just the raw premium but the combination of size, Vol/OI ratio, time to expiry, and execution style that together characterize whether the order looks like informed institutional positioning or routine hedging noise.

Flow monitoring is not a prediction tool, it surfaces evidence of large, informed, or urgent options positioning for you to evaluate in context. Knowing how orders are constructed, how the contracts are specified, how the OCC records and adjusts them, and how liquidity determines exit cost gives you the foundation to interpret what you see rather than simply reacting to a large number on a screen.

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