An exchange-traded option is a type of derivative security that gives the holder the right, but not the obligation, to buy or sell the underlying asset at a specified price on or before a certain date. Exchange-traded options are traded on exchanges, and they are typically bought and sold in lots of 100. The most … Read more
A leg strategy is an options trading strategy that involves buying and selling options contracts in order to profit from a move in the underlying asset. The strategy gets its name from the fact that it involves buying and selling options in different expiration months (i.e., buying a March call and selling a April call). … Read more
The intrinsic value of an asset is the difference between the market value of the asset and the present value of the expected future cash flows from the asset. The intrinsic value is also sometimes referred to as the “true” value or the “real” value. The market value of an asset is the price that … Read more
The exercise price is the price at which the holder of a call option can buy the underlying asset, or the price at which the holder of a put option can sell the underlying asset. Is it better to exercise options when the price is high or low? It is better to exercise options when … Read more
A zero cost collar is an options trading strategy that is used to protect downside risk while also providing upside potential. The strategy involves buying a put option and selling a call option at the same time. The strike prices of the two options are typically close together, and the premiums of the two options … Read more
A synthetic futures contract is an options trading strategy that combines a long position in a futures contract with a short position in a call option on the same underlying asset. The call option provides downside protection in case the price of the asset falls, while the futures contract limits the upside potential. How do … Read more
An options trading strategy that is designed to profit from the lack of liquidity in the marketplace is known as an illiquid option. This type of strategy generally involves taking advantage of the fact that there are fewer buyers and sellers in the market, which can lead to large price swings. Some common illiquid options … Read more
An American option is an option that can be exercised at any time prior to its expiration. This type of option is often used by investors who want to capture dividends that may be paid out before the option expires. How soon after ex-dividend date can I sell? You can sell your shares the day … Read more
Option margin is the amount of money that an options trader must have in their account in order to enter into a particular trade. The margin is calculated based on the underlying asset’s price, the option’s strike price, and the trader’s chosen position (long or short). In most cases, the option margin is a small … Read more
An outright option is an options contract that gives the holder the right, but not the obligation, to buy or sell a specific asset at a specified price on or before a specified date. Outright options are traded on exchanges and can be used to speculate on the future direction of the underlying asset or … Read more
