Option contracts pricing consists of both the extrinsic value and intrinsic value that combine to create what each strike price and expiration is worth in an option chain. Extrinsic value is the potential of what an option has to be worth in the future while the intrinsic value is how much an option is worth […]
What are covered puts? A covered put is created when put options are sold that correlates with a short stock position already being held or opened as a sell/write at one time. The stock position acts as a hedge for the short puts to limit losses as the short shares can be used if the
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What is IV in Options? In Black–Scholes option pricing model, the implied volatility or IV of an option contract is the cost embedded in the option of the volatility of the underlying instrument that it is being valued against. Volatility is the input in an option pricing model that measures when an asset will likely
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How to calculate an option price A Black-Scholes Calculator can be used to figure the price (fair market value) of a put or call option contract based on the Black-Scholes pricing model. It also calculates and plots the Greeks: Delta, Gamma, Theta, Vega, Rho. Enter your own values through the website in the link below
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A common misunderstanding among new option traders is that 80% to 90% of all option contracts expire worthless, so a seller of option premium will have a higher win rate than a trader that buys options. This belief misinterprets a statistic published by the Chicago Board Options Exchange (CBOE) that only 10% of option contracts
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Rolling options is the process of moving from one call strike price and expiration on a specific stock to a different call of a different strike price and expiration on the same stock. It entails exiting the current option contract and then entering a new position immediately after or at the same time . The
Open interest and the volume traded in options are two different metrics that show the liquidity and trading activity of options contracts at different strike prices and expiration dates. Volume is the quantity of contracts traded in a period, while the open interest shows the number of contracts that currently exist and are active in
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Instead of searching for an options play structure every time you come across a potential option trade you want to make you can now simply refer to the below guides created by Gavin McMaster at OptionsTradingIQ.com you can also following Gav on Twitter at @OptionTradinIQ. Options traders at all trading levels can find having these
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Buy to open versus buy to close in options trading are very different processes that many stock traders don’t understand. A buy to open order in options trading is when a call or put contract is bought and entered as a long position. The term comes mostly from the fact that when the option seller
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Option contracts are different than stock shares in the way they are created, traded, and closed. There are two different types of selling in options trading: sell to open vs sell to close. An options trader will sell to open a new option contract that they want to be short. This is also called writing
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