What it means
Imagine a table of contracts on one share. Every combination of call or put, strike price and expiry date forms a distinct series.
A call with a $50 strike expiring in June is one series, and a call with a $55 strike expiring in June is a different series. The distinction is more than labels.
Contracts within a series are interchangeable, meaning one can be used to close out another, and they share one price and one pool of open interest. This standardisation is what lets options trade easily on an exchange.
The number of series grows quickly. If an exchange lists several expiry dates and many strike prices, then multiplying by two for calls and puts gives the total number of series for that underlying.
Popular shares have the most series and the most liquid trading in the series near the current price. Series are also added over time.
As the share price moves, the exchange adds new strike prices around the new level, and as expiry dates pass new ones are opened. A series that was not available last month may exist this month.
Clearing houses keep a record of each series. They guarantee that every contract will be honoured, which means a buyer in one series does not need to worry about the creditworthiness of the particular seller on the other side.
This guarantee is a key reason that listed options are trusted by businesses. Understanding series matters for both traders and finance teams.
A treasurer using options for hedging must pick a specific series, and the liquidity of that series affects how easily the hedge can be opened or closed. Contracts in thinly traded series have wide spreads, so a slightly different strike or expiry may give a much better price.
In practice
Real-world examples.
Example
A trader buys 10 contracts in the June $50 call series. Later she sells 10 contracts in the same series to close the position, which cancels her exposure because the contracts are interchangeable. Her broker records the net result as a realised gain or loss.
Example
A company treasurer comparing hedging options finds that the September $40 put series has much higher trading volume than the neighbouring $42 series. She chooses the more liquid series to keep the cost of opening and closing the hedge low.
Example
An exchange lists new strike prices after a share price jump. A broker explains to a client that the new strikes are separate series, with their own prices and no trading history. Early trading in such new series is often thin, so the spreads can be wide.
Formula
Calculation
Number of series = number of expiry dates x number of strike prices x 2 (calls and puts)
An exchange lists options on a share with 4 expiry dates and 10 strike prices for each expiry. The number of series = 4 x 10 x 2 = 80. Of these, 40 are calls (4 x 10) and 40 are puts (4 x 10). If a trader holds 5 contracts in the June $50 call series, she holds 5 of the 80 available series, and each contract is interchangeable with any other in that series. A contract in the June $55 call series would be a different product with its own price.Case study
Seen in the real world.
Quarry Hill Mining is a fictional company with a large holding of shares in a listed partner. Its treasurer wanted to hedge part of the position with put options and looked at the available series.
The chain showed 6 expiry dates and 12 strikes, so there were 6 x 12 x 2 = 144 series. Most were thinly traded, and only a handful near the current price had tight spreads.
In this illustrative story the treasurer chose a liquid series even though its strike was not perfect, because the lower trading cost outweighed the small mismatch. The finance team noted the series details in the hedge file so that the position could be tracked and closed in the same series later. The treasurer also set a reminder to review the hedge a month before the expiry date.
Watch out
Common mistakes.
- Assuming all options on a share are the same product, when each series has its own price, volume and liquidity.
- Choosing a thinly traded series for convenience, when the wider spread makes it expensive to enter and exit and can eat a large part of the hedge's benefit.
- Trying to close a position by trading in a different series, which opens a new position instead of cancelling the old one.
Questions
People also ask.
Is a call and a put at the same strike the same series?
No, the type of option is part of the definition, so calls and puts always belong to different series.
How many series does a share have?
It depends on how many expiry dates and strike prices the exchange lists, and the number changes over time.
Why does liquidity differ between series?
Because traders concentrate on strikes near the current share price and on nearer expiry dates, leaving other series quiet.
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