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Are OPRA-Designated Options Symbols Disappearing?

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I find my brokerage's platform easy to use with one exception: options orders require the trader to input options symbols. If you happen to be dyslectic, in a hurry or just a bad typist, it's easy to transpose two of the letters that comprise an option's symbol and end up with a trade you didn't intend to make.

For those of you lucky enough to use a trading platform that allows you to click on an option chain without having to input the option's symbol, some review of symbology might be in order. The options symbols for standard options usually consist of a five-letter symbol. The first three letters comprise a root symbol that identifies the underlying. For example, the first three letters of options on IBM will usually be "IBM." An exception would be LEAPs on IBM. Those are coded "VIB."

The next two letters in the five-letter symbol pack in a lot of information. They identify the expiration month, tell whether the option is a call or put and provide some information about the strike of the option. In Options as a Strategic Investment, McMillan claims that the symbology for the month of expiration is actually simple, although I've never found it easy to remember (23). He writes:

For call options, the letter A stands for January, B for February, and so forth, up through L for December. For put options, the letter M stands for January, N for February, and so forth, up through X for December. "Y" and "Z" are never used to indicate expiration months.

Simple, maybe, but I could quibble with that conclusion. Once one gets past "A" or "B" or "M" or "N," saying the alphabet out loud while holding up one finger for each letter and then identifying the 7th or some other month has never seemed quick, easy or intuitive to me. Even if I give McMillan that point and concede that part of the symbology is straight forward, the part of the code that identifies the strike is not. This letter is the last in the five-letter symbology.

McMillan advises that, although the letter "A" usually stands for a $5.00 strike, it might stand for $105 in a more expensive stock. For example, the letter "B" typically stands for 10, but with GOOG quoted at $393.69 at the close on 5/01/2009, would it be the May 410 call that employed that "B"? Actually, both the MAY 310 and MAY 410 employ it, with one the GGDEB and the other the GOPEB, respectively. In this case, what identifies one as having a strike in the 300's and the other in the 400's is the root symbol found in the first three letters.

McMillan warns that the exchanges "do not have to adhere to any of the generalized conventions described" in his text. Those parties participating in OPRA usually stick to a standardized format for this symbology, but all sort of problems have sprung up since the standards were first determined.

What are the exchanges which use these conventions for symbology? First, OPRA refers to "Options Price Reporting Authority." Various exchanges participate in this organization which provides information such as last-sale options quotations, according to Investopedia. Investopedia lists component exchanges as the American Stock Exchange (AMEX), Chicago Board Options Exchange (CBOE), Boston Options Exchange (BOX), International Securities Exchange (ISE), Pacific Exchange (PCX) and Philadelphia Stock Exchange (PHLX).

What are some of the problems since the OPRA symbology conventions were established? Some of the problems have resulted from the fact that LEAPs never used these standards. Furthermore, the Options Clearing Corporation notes that "the introduction of exchange listed flexible (FLEX) contracts necessitated a different symbology." Splits, mergers, and the unexpected introduction of a dividend can result in non-standard symbols, too. All in all, I find the whole thing confusing and apparently others do, too.

So my ears perked up when, while attending a Web-Ex presentation through the Sheridan mentoring program on Friday, May 01, 2009, I heard another of the attendees comment that those symbols we all hate might be going away. The link he provided to back up this information brought me to an Options Clearing Corporation page titled "Symbology Initiative." That article can be found at: Click Here

That linked page detailed an initiative that's been in place since July, 2005, when the Board of Directors of the Options Clearing Corporation asked the staff to start working toward an eventual elimination of the OPRA codes. The staff was to meet with industry representatives, specifically those from the exchanges, broker dealers, vendors and others. A plan and the resultant comment period have already elapsed. In September, 2008, test scripts and a testing plan were approved and published. A Scripted Industry Testing period has been slated to begin in September, 2009. Version 1.8 of the Plan states that its purpose is to "[r]ecommend an approach to eliminate the practice of representing listed options contracts with OPRA codes (tickers) . . . by the end of November 2009."

The plan will cover equity, index, yield-based, short-dated and flex options. If I'm reading the plan correctly, "security futures product symbology remains 'as is.'" The plan's approach includes the use of the underlying security's symbol "to the greatest extent possible." All options that have the same deliverable (using the 100 multiplier) and employing the same settlement calculation will use the same symbol. Hopefully, that would do away with such odd differences as those we saw in the first three letters of GOOG's options symbols when the strikes are in the 300's as opposed to the 400's, for example.

The stated intention is to "eliminate the practice of using unique symbols for special produce designations such as LEAP, Short Dated Options, Weekly, Quarterly and wrap symbols." However, if settlement terms are different--if one option on an underlying uses a settlement value calculated at the open and another calculated at the close, for example--different symbols will be used.

Apparently, corporate actions could still result in "non-standard deliverable components" and that will be handled by adding a number to the end of the symbol used prior to that corporate event. The example used was that a MSFT option with a non-standard deliverable as a result of some corporate action such as a split might then be listed as a MSFT1 option.

The contemplated "Symbology Key" will have a minimum of six characters in the option symbol, and those will include figures that show the explicit expiration date. The elements in the symbology key will be as follows:

This would apparently designate a MSFT 47.5 strike call that expired on March 18, 2006.

I don't know about you, but the more I read about the plan, the less excited I became. It seems that I'm going to have a whole lot more to type into my order forms, not a whole lot less. Whether or not we're excited about the plan, however, some of the information will make it easier to determine exactly when that option expires and whether it's a call or put.

If you'd like to read the plan in its entirety, you can click the following link to find the article: Click Here

Linda Piazza

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