Glossary If you are new to options, this page can be used as a beginner tutorial, guiding you through the basic terms and concepts.
Stock Options Trading 101 [The ULTIMATE Beginner's Guide]
These are not only essential for successful options trading, but also needed for understanding more advanced topics such as option pricingvolatilityGreeksor option strategies. Strike vs. Market Price vs.
The strategy applies to the stock market, Forex currencies, and commodities. In this article, you will learn about what options are, how to buy Put and Call options, how to trade options and much more.
Underlying Price — Three different prices often come up when discussing options. It is important to understand their differences and how they are related to each other. European options. Exercising Options and Expiration — When you hold an option, there are three ways for you to stop holding it: you can sell it in the options market, you can exercise it, or the option can expire.
Intrinsic Value Intrinsic Value — Explaining the concept of intrinsic value, which is in fact not limited to options. When underlying price is at or below the strike price, intrinsic value is zero, because options tutorials the option would not get the stock cheaper than in the stock market.
Strike Price and Intrinsic Value of Put Options — Put option intrinsic value follows the same logic as calls, only the direction is reverse, beceause a put represents a right to sell, not buy, the underlying security.
Option Intrinsic Value Formulas — A summary of call and put intrinsic options tutorials formulas.
They are closely related to intrinsic value and the relationship between strike price and underlying price. They allow us to easily categorize options in three groups, with each having some shared characteristics when it comes to option premium, time value, and practical trading.
In the Money vs. The latter is less simple to calculate, as it depends on a number of factors, such as time to expiration, volatility, or interest rates.
Understanding time value and how it reacts to different factors is the key to profitable options trading. The following pages explain time value for different kinds of options in greater detail:.