# Option Series: What It Means, How It Works

## What Is an Option Series?

An [option](https://www.investopedia.com/terms/o/option.asp) series refers to a grouping of options on an underlying security with the same specified [strike price](https://www.investopedia.com/terms/s/strikeprice.asp) and the same expiration month. However, [call](https://www.investopedia.com/terms/c/calloption.asp) and [put options](https://www.investopedia.com/terms/p/putoption.asp) are parts of separate series. For example, a call option series would include the available calls on a specific security at a certain strike price that will expire in the same month.

### Key Takeaways

*   An option series refers to a grouping of options on a given underlying security with the same specified strike price and the same expiration month.
*   Since option series contain calls or puts on the same security at the same price that expire at the same time, their prices should be extremely similar.
*   An investor will find multiple option series listings within an option class, which refers to the option’s designation as either a call or a put.
*   Option series offer many ways for traders to make money.

## Understanding Option Series

Since option series contain calls or puts on the same security at the same price that expire at the same time, their prices should be extremely similar. For example, all January 20, 2023 calls on Apple with a strike price of $150 should cost about the same amount. However, options are highly [volatile](https://www.investopedia.com/terms/v/volatility.asp) and suffer from [liquidity](https://www.investopedia.com/terms/l/liquidity.asp) issues, which can create opportunities for traders. The actual prices observed on options sometimes differ significantly from values given by the [Black Scholes model](https://www.investopedia.com/terms/b/blackscholes.asp).

> **Important**
>
> Although there are many deviations of real option prices from their theoretical values, most of these opportunities are too small for individual investors to make significant profits.

An investor will find multiple option series listings within a designated option class. An [option class](https://www.investopedia.com/terms/o/option-class.asp) refers to the option's designation as either a call or a put. Generally, most options exchanges will list options by class. Therefore, an investor seeking to buy call options on an underlying security would see a long list of call option series listings, each with their own individual strike price and [expiration](https://www.investopedia.com/terms/e/expirationdate.asp). Similarly, an investor seeking put options on an underlying security would first look to the put option class for all of the series listings at different strike prices and expiration dates.

All option series are also part of [option cycles](https://www.investopedia.com/terms/o/optioncycle.asp). For instance, XYZ Company may have a call option with a strike price of $110. When the option is listed, it can be assigned one of three cycles:

*   **Cycle one**: JAJO — January, April, July, and October
*   **Cycle two**: FMAN — February, May, August, and November
*   **Cycle three**: MJSD — March, June, September, and December

Exchange-traded options follow their designated cycle, with listings available for the first two months followed by the next two months for their cycle. If the XYZ $110 call is a cycle three, then in January it would have the following listings: XYZ 110 Jan, XYZ 110 Feb, XYZ 110 March, XYZ 110 June. Each listing would be considered an individual option series with the four option offerings representing the option cycle. Most exchange-traded option series listings will expire on the third Friday of their listed expiration month.

Option series trades on regulated exchanges are supported by a third party, which fulfills options contracts when defaults occur. Thus, options investors need not worry too much about [counterparty risk](https://www.investopedia.com/terms/c/counterpartyrisk.asp) with publicly traded options. This third party will step in to cover their positions in the event of a potential counterparty default. The Options Clearing Corporation ([OCC](https://www.investopedia.com/terms/o/occ.asp)) is perhaps the best known third party that guarantees options.

## Special Considerations

Option series offer many ways for traders to make money. Option series contain [options contracts](https://www.investopedia.com/terms/o/optionscontract.asp), which cover 100 shares of the underlying security. However, options can be traded in larger collections of contracts. Like stocks and most other goods, there are price disparities when buying or selling in bulk versus small amounts. [Arbitrageurs](https://www.investopedia.com/terms/a/arbitrageur.asp) can take advantage of the resulting price difference to profit.

There are also times when the prices of options drift far from where economic theory says they should be. When the market is unstable, anomalies like [volatility smile](https://www.investopedia.com/terms/v/volatilitysmile.asp) become more pronounced and create more chances to make profits. By understanding [how options are priced](https://www.investopedia.com/articles/optioninvestor/07/options_beat_market.asp), traders can take better advantage of deviations in prices within option series.