What are options and puts,day trading penny stocks youtube,bank withdrawal slip form - .

19.11.2014 admin
Compared to short selling the stock, it is more convenient to bet against a stock by purchasing put options as the investor does not have to borrow the stock to short. Say you were proven right and the price of XYZ stock crashes to $30 at option expiration date.
However, if you were wrong in your assessement and the stock price had instead rallied to $50, your put option will expire worthless and your total loss will be the $200 that you paid to purchase the option.
An option is a standardized contract providing for the right - but not the obligation - to buy or sell an underlying financial instrument.
In exchange for the right to buy ("call") or sell ("put") an underlying security on or before the expiration date, the purchaser of an option pays a premium. The strike price, or exercise price, of an option determines whether that contract is in the money, at the money, or out of the money.
Intrinsic value describes the amount the stock price is above the strike price (for calls), or below the strike price (for puts). Time value is subject to several factors, primarily time to expiration and implied volatility. If the stock were at 500 when you bought a 510 call, the option is again all time value, since it has to rise $10 to be in the money. Again using Google for an example, the GOOG December 500 call option gives you the right to buy 100 shares of GOOG for $500 per share up until the expiration date in December.
Let's say you purchased the GOOG 500 call option for $25 when the stock was trading for $500. The flip side is that if the stock does not move up, then the option will lose all of its value by expiration.
In this case, let's say you were concerned about the downside, so you purchased the GOOG 500 put option for $25 when GOOG the stock was trading for $500. Selling the put - Once a put is bought it can be sold at any time, and this is the most common way of exiting a long position. Letting it expire - If a put gets all the way to expiration, it will expire, worthless if it is out of the money (when the stock price is above the strike price - See Options Pricing). Regardless of whether you are buying calls or puts, there are some general rules to follow.
Two, options should generally be bought when the time value - primarily influenced by a factor known as implied volatility, or the expected price swings of the underlying - is expected to stay flat or to rise. Finally, when you buy an option, generally you will want to sell it, ideally for a still-greater premium.
By way of explanation, let's say you sold the GOOG 500 call option for $25 when GOOG was trading for $500. Letting it expire -If the option gets all the way to expiration, it will expire, worthless if it is out of the money. Assignment - American-style options (all equity and ETF options) can be exercised at any time before expiration. Selling options is best done when implied volatilities, and therefore option premiums, are high and expected to fall. Since we already know that time decay is greatest in the last 30 to 45 days, this is typically the best time to sell options.
Example: Apple (AAPL) is trading for 175, a price you like, and you sell an at-the-money put for $9.
Example: You own 100 shares of AAPL at 190 and want to protect your position, so you buy a 175 put for $1. The process in which the buyer of an option takes, or makes, delivery of the underlying contract. The process by which the seller of an option is notified that the contract has been exercised. High open interest figures, generally near the at-the-money strikes, tell us there are more prospective trading partners who could accept your price.
In consideration of your time, we'll send the first two chapters of Jon and Pete's latest book, How We Trade Options. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, or individual's trading does not guarantee future results or returns. TradeKing Senior Options Analyst, Brian Overby, dispels another option trading myth about the pricing of call and put options.
If they were combined together, with different time frames for the call and the put, the actual Profit & Loss graph would differ in appearance. That left CRUS, MDT and MSFT with which I could write covered calls for June, which I subsequently did last Wednesday night, May 16th. I have already decided that I'm not going to panic this time, I'm going to stay the course and wait for either my covered calls to be executed by their buyers or for the June 15th expiration date to come, and see whether any or all of my contracts are ITM or if they expire worthless. At that time, I'll see where my cash balance is, see what I've got on hand that I can write covered calls for, and check my watchlist and see if there is anything due up at bat next for which I will attempt to write cash-secured puts. As Foreign Exchange (Forex) markets comprise the largest volume of monetary values traded on a daily basis when compared to every other financial market and asset class, it is no coincidence that one such popular method of trading currencies include forex options trading – also known as currency trading options. An option is a right but not an obligation to buy or sell an underlying asset class at a specified strike-price, and the right of which can be bought or sold either on an exchange (exchange-traded) or in the over-the-counter (OTC) markets (off-exchange).
The owner of an option contract can exercise this right to buy or sell, up until expiration of the contract at which point the option expires worthless if not exercised.
Although the share of forex options trading overall doesn’t dominate the majority of FX market volumes, it still represents a meaningful share of trading and thus can be a viable instrument and method to consider when investing or trading foreign exchange. Just like options on nearly any financial instrument, in foreign exchange, call options involve the right to buy – and put options convey the right to sell  -an underlying instrument at a specified exchange rate, and premiums are paid by buyers and earned by sellers when carrying out forex options trading.
Options contract are typically for a pre-determined quantity of an underlying asset, and will vary depending on the contract specifications of the broker or exchange operator, as well as the specific instrument being traded, such as an underlying currency pair.


Options are divided into Puts and Calls, whereas a “Call” is the right to buy an underlying asset at a specified strike-price, and where a “Put” is the right to sell an underlying asset at a specified strike-price. However, Buying or Selling either of these option types can have very different consequences. Moreover, each option contract conveys a quantity of the underlying asset that will be traded if the contract is exercised by the party that has the right to exercise their option.
In the event the buyer of this option exercised the contract, the seller would technically need to deliver the underlying EUROS in exchange for the US Dollars the seller was paying to purchase the 100,000 Euros at the underlying strike price. Keep in mind that thanks to modern trading platforms and matching engines the counter-party to trades is typically mitigate to the principal broker or a 3rd party such as in the case of an agency broker, whereas clients do not need to deal with other clients or traders that may be on the other side of the trade.
At any rate, the customer is relying on their broker to make good on a transaction, and this should be outlined in the customer account agreement which governs the nature of the relationship including from a legal perspective. Time Value is the additional amount that people are willing to pay over and above the intrinsic value.
Additionally, the risk is capped to the premium paid for the put options, as opposed to unlimited risk when short selling the underlying stock outright. If the underlying stock price does not move below the strike price before the option expiration date, the put option will expire worthless.
A put option contract with a strike price of $40 expiring in a month's time is being priced at $2. With underlying stock price now at $30, your put option will now be in-the-money with an intrinsic value of $1000 and you can sell it for that much.
If the strike price of a call option is less than the current market price of the underlying security, the call is said to be in the money because the holder of the call has the right to buy the stock at a price which is less than the price he would have to pay to buy the stock in the market. If GOOG were trading at $500 when you bought a 490 strike call option for $25, then $10 of the option's value would be intrinsic value. You would do this with the expectation that the price of the option will rise, usually through the rise in the price of the underlying stock.
This is the most common way of exiting a long position, and the only way of exiting a long call that captures any remaining time value in the option. If the stock price is above the strike price by $.01 or more, it will be automatically exercised and shares will be delivered to your brokerage account. Puts give the buyer the right to sell a specific number of shares (usually 100) of an underlying stock at the strike price until the expiration date. This is the only way of exiting a long position that captures any remaining time value in the option. One, the expiration should give the option enough time to perform without being overexposed to time decay. Buying options is a limited-risk strategy, and all of that risk lies in the premium paid for the option. You do not want it to expire, since you will receive zero premium, and normally you don't want to exercise your right to purchase the underlying shares, unless that is your particular strategy (say for tax reasons). When option premiums are high (that is, when implied volatility is high), some traders turn to selling options.
By selling calls, you are obligating yourself to selling the stock at the strike price when you are assigned. If they are cash secured, then you have the cash in your account to purchase the stock at the strike price if assigned. Here we the ideal is to have the options expire worthless, and we are not interested in buying back the options we have sold unless necessary.
INTC moves up to $28 and so your option gains at least $2 in value, giving you a 200% gain versus a 12% increase in the stock.
If the stock is below 175 at expiration, you are assigned, and essentially purchase the shares for $166.
Should the stock drop to 120, you are protected dollar for dollar from 174 down, and your loss is only $16, not $70. Option chains show data for a given underlying's different strike prices and expiration months. But note that volume does not equal open interest, since some trades are made to close positions. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities by OptionsHouse.
After spending decades in the trading pits of Chicago, Jon 'DRJ' and Pete Najarian founded the company in 2005 to help people better manage their own investment portfolios. Options involve risk and are not suitable for all investors.Please read Characteristics and Risks of Standardized Options.
If any of my shares get called away from my covered calls, that means that their market price has come up to at least my strike price for that contract, and I will have received the corresponding credit for each 100 shares sold out of my account. In addition, as will be revealed below, sellers of options, known as writing options, carries its own set of differences when compared to buying options, and understanding currency trading options can be a valuable tool in a forex trader’s portfolio. The way that such measurements are made depends also on what type of option position is being taken, whether a Call is being bought or sold, or whether a Put is being bought or sold, as will be described below.
For example, buying a call gives the buyer the right to buy at the underlying strike-price of the option, whereas selling a call requires that the seller must be able to deliver the underlying asset and sell it to the buyer at the underlying strike-price if the buyer decides to exercise their option prior to expiration. Sign up to get our weekly forex alerts and pip action tips by experts sent straight to your inbox. You believe that XYZ stock will fall sharply in the coming weeks and so you paid $200 to purchase a single $40 XYZ put option covering 100 shares. Since you had paid $200 to purchase the put option, your net profit for the entire trade is therefore $800.
Likewise, if a put option has a strike price that is greater than the current market price of the underlying security, it is also said to be in the money because the holder of this put has the right to sell the stock at a price which is greater than the price he would receive in the market.


Therefore an at-the money or out-of-the-money option has no intrinsic value and only time value. This gives you a 100 percent return on the call option based on a 10 percent return on the stock.
Long calls are almost always sold before expiring, since at that point they will have lost all time value.
Long options are almost always sold before expiring, as at that point they will have lost all time value. Since options have an expiration date, a large part of their value is time value (for more, see our lesson on Options Pricing). All else equal, if there is a rise in implied volatility, then there will be a rise in the option premiums.
It is also the reason that selling calls is considered the options strategy with the highest risk.
Another way to buy stock for less than the current market price is an options strategy called cash-secured puts. Traders sell puts if they think the stock is going to stay flat or go up slightly, but only if they are willing to buy the stock if assigned.
If the stock is below, you will be assigned, and you will purchase the stock at the strike price. For instance, if you sold a call, the stock went up through your strike, and you do not want to be assigned and forced to sell the stock, you could buy back the option to close the position.
If it is in the money by $.01, it will be automatically exercised and you will be assigned, automatically selling stock if you were short a call or buying stock if you were short a put. It is important to remember, however, that selling options involves considerable risk, and high implied volatility can always go higher. If the stock is still at 34 at expiration, the option will expire worthless, and you made a 3% return on your holdings in a flat market. This should not be considered a solicitation to open an OptionsHouse account or to trade with OptionsHouse. OptionsHouse does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular investment or investment strategy, and you shall be fully responsible for any investment decisions you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy.
In either case you will receive a credit for the strike price for the 100 shares of each contract you sold.The first and most important rule about selling covered calls, at least in my book, is that you have to be OK if your shares are called away! I may have left some money on the table if the price went up higher than the strike price plus the premium I received, but with those proceeds my next step will then be to get back into those positions, probably through the use of writing cash-secured puts for each stock that got called away in June. The price at which shares can be bought or sold also is defined by the contract, and is known as the strike price.
The higher the implied volatility, the more expectation that the underlying stock will make big moves, increasing the option's chances of being in the money.
This time value will deteriorate as that expiration approaches; time decay increases exponentially in the last 30 to 45 days of an options life, so this is usually not the time to own options. This increase can produce profits for long options, even if the stock price doesn't move, because the chance of movement has increased. So with future resale value in mind, we can see why risk management rules are important, such as taking profits when your position doubles or closing out the position when it loses half of their entry value. If a call buyer decides to exercise the long call, that exercise is put out randomly to a seller -any seller - of that call, and the individual is obligated to sell stock to the call buyer.
For this reason, selling puts can be an excellent way to initiate long stock positions, and get paid to do so. If you are using cash-secured puts to acquire stock, then assignment means you have achieved your objective at a below-market price. In reading content in the Community, you may gain ideas about when, where, and how to invest your money. What I look for when selling covered calls is a strike price that is far enough out-of-the-money (or OTM; that is, higher than the current market price) that my shares aren't likely to be called away before the next month's expiration date, but I still make a decent amount on the premium for each call contract I write. If the strike price equals the current market price, the option is said to be at the money. This also makes them a way to protect positions as insurance (see the lesson on Protective Puts).
Conversely, if you buy options when implied volatility and premiums are high, such as before earnings, then the stock can move in the direction that you want and you can still lose money, because with the news out, the implied volatility could fall. Remember the Collar (Play #8) is actually the combination of doing a Covered Call (Play #6) and a Protective Put (Play #7) on the same stock, at the same time, with all options using the same expiration month.
However, should my shares be called away, I'm OK with that happening; if I still want to maintain a position in that stock, I will get back long, by either buying the shares I want outright or, more likely, selling the appropriate number of cash-secured puts.The second and equally important rule is, of course, always set a Limit Price for your Premium!
Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.
This is the primary lesson from the Top of the First, which I had to learn twice for it to really sink in.First At-BatLooking through my portfolio, I found that not all of the positions where I hold at least 100 shares of a stock are worth the time, effort and commissions to write one or more covered calls. It is for largely that reason that most retail options traders underestimate the challenge of making money with options.



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