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A question recently came up about the symbols that represent options and what seems like a relatively boring and mundane topic is actually filled with twists and turns and many surprises. Okay, so it probably won't make you rich knowing more about option symbols than 99 percent of the non-professional options traders out there, but it will keep you from making mistakes when dealing with your broker, and in some circles, can make you a hit at cocktail parties.

The truth of the matter is that the system which has been in place for 25 years (since 1973) has not kept up with available technology and has become extremely unwieldy. In the industry, rumor has it that a particular large brokerage company, whose name I probably shouldn't mention (initials M.L.) has lobbied against making any changes so they would not have to make major expensive changes to their software. In any event, the situation has gotten out of control and an industry committee was formed to study the problems and propose solutions.

In this article, I'll describe the current symbology, associated problems and the proposed solutions and timetable.

Current Symbols
The original concept of the current symbology was to have every option represented by a symbol consisting of 3-5 alpha characters. The lack of numeric characters has proven to be painful. The characters would consist of a 1-3 letter base symbol, followed by a one letter expiration month code, followed by a one letter strike price code.

Limiting the base symbol to only 3 characters works well for stock symbols of 3 characters or less, i.e. Citigroup (C), General Electric (GE), or Avon Products (AVP). However when NASDAQ came along with its 4 and 5 letter symbols, that was the first major problem. So instead of allowing the base symbol to be up to 5 letters in length, it was decided to keep the maximum to 3, thereby creating the need for some ingenuity. It was decided that the OCC (Options Clearing Corporation) would assign base symbols for these stocks. Generally they will include the letter Q in the symbol, but not always. Example, Microsoft whose symbol is MSFT has a base symbol of MSQ, but Research in Motion, RIMM, has a base symbol of RUL. What a system!

Next, we have the expiration month code, which also identifies the option as a Put or a Call. The expiration month codes are:

(click to enlarge)

These codes assume the standard expiration, i.e. the Saturday following the 3rd Friday of each month. That worked fine for awhile, but with the introduction of options with non-standard expirations such as the VIX which expire on the 3rd Wednesday of the month, and then flex options, which can expire on almost any day of the year, there were problems of non-standardization. When weekly options were introduced the OCC had no choice but to add a weak indicator (pun intended) after the base symbol, changing the length of these options to as many as 6 characters. For that reason, many platforms cannot recognize these symbols and therefore won't let you trade weekly options.

The final part of the symbol is the strike code. These are:

(click to enlarge)

Let's look at some examples of what a complete option symbol looks like, and then I'll point out some more problems.

Notice that there are at most 26 possible strike codes for a given option; A-Z. In situations where a stock has been very volatile, there may be more than 26 strikes listed. For example, the RIMM April options have strikes from 40 to 150. So what the OCC decided to do was to add an additional base symbol that would also represent the same underlying stock. These symbols are called "wrap symbols." So for RIMM in April, there are 2 base symbols RFY and RUL.