This tag is to be used for any question on Options, A more specific tag [put-options, call-options, options-assignment, option-exercise] should be used when appropriate.

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4
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1answer
42 views

Whats the difference between a qualified and an unqualified covered call?

I own various shares that I want to start writing covered calls on but I've heard about differences between "qualified" and "unqualified" covered calls. What's the difference? All I can find is that ...
1
vote
1answer
37 views

How are options traded on exchanges priced?

First, my knowledge is limited and I am still learning. I understand that each bank has various models to price options and that the prices vary based on these models. If this is the case, how are ...
0
votes
2answers
40 views

Get free option quotes

Is there a google or yahoo api that provides option quotes similar to the below for stock quotes? http://www.google.com/finance/getprices?i=60&p=3d&f=d,o,h,l,c,v&df=cpct&q=SPY I am ...
2
votes
2answers
78 views

What is the rationale behind brokerages establishing tiers/levels for options trading?

I'll preface this by saying that my experience in this field is limited, so bear with any abuses of terminology. I understand the rationale behind FINRA's "Know your customer" and suitability rules ...
5
votes
2answers
95 views

Am I doing the math for this covered call/long put strategy correctly? What risks do I run with this strategy?

In this trade, I write an in-the-money covered call and buy an in-the-money put (as an example) on GM, expiring in September 2014. The call premium is $10.02 with a strike of $26, and the put premium ...
1
vote
1answer
67 views

What does an options premium really mean?

I am taking a derivatives class at college, and I am getting slightly confused about how to understand options premiums. I have a couple of questions, specifically on this slide presented in class: ...
5
votes
2answers
117 views

Why would someone buy a way out-of-the-money call option that's expiring soon?

I swing trade equity options every once in a while for fun. This morning I witnessed something I do not understand at all. In the attached photo, why would someone purchase 6 contracts for .05 at ...
2
votes
1answer
139 views

Does the uptick rule apply to all stocks/ETFs and other securities, or only specific ones?

Does the uptick rule on U.S. securities apply universally across all stocks, all bonds, all futures and all options? Or is it limited to certain category of securities/instruments? Is there a ...
1
vote
1answer
130 views

Had employee options in a company that has been sold to another foreign company. What happens?

One of my parents had employee options in a company that was based in the US. Recently however, that US company had been sold off to a German company (now based in Germany). Question is, what ...
-1
votes
1answer
38 views

Selling the underlying in case a covered call is exercised?

If I sell an out-of-the-money covered call and the option becomes in-the-money prior to expiry, then am I forced to sell my underlying at the strike price (assuming the counterparty decides to ...
3
votes
3answers
79 views

When writing a covered call, what's the difference between a “net debit” and a “net credit”?

My brokerage account (Fidelity) gives me two choices when writing a covered call: net debit and net credit. What's the difference between these two choices? For example, take DRRX (share price $1.4). ...
2
votes
1answer
225 views

When should I exercise my startup stock options? How would it be taxed?

Let's say I'm an employee at a startup where I own fully vested stock options. Scenario 1 I have not exercised my stock options and my startup was bought. Do I still get to exercise my options? The ...
1
vote
2answers
74 views

Bid-Ask at market open, which comes first? [duplicate]

I am trying to get a grasp on how the bid-ask match maker works, in particular for options as there is less volume and fewer market orders. Lets say I own an option, and place a limit sell order for ...
3
votes
2answers
144 views

How can the writer of an option cancel or reverse the position & obligation before exercise or expiration?

How can the writer of, say, a call option cancel or reverse the position and its obligation (to deliver shares) before the option is exercised or the expiration date reached? Can an option that has ...
1
vote
3answers
85 views

Why is early exercise generally not recommended for an in-the-money option?

Why is it said that early exercise of a (call) option is not recommended and it is always better to sell the option instead? Is it just to avoid assignment fees? Of course, we assume that the option ...
2
votes
1answer
96 views

Am I doing the math for this long straddle strategy correctly?

I'm looking at making a long straddle trade, and I'm trying to make sure I have the math correct before making the trade. Here are the details in the example I want to work out: I'm using options on ...
1
vote
2answers
114 views

Why do only a handful of Canadian companies have options trading on their stocks?

Of all the Canadian companies whose shares trade on an exchange, I noticed that only a handful of them offer options (calls, puts). What is the reason for this? Does not offering options on its shares ...
1
vote
2answers
110 views

Why are so few options ever actually exercised?

What is the reason that only a minor percentage of options get exercised (17%, I read on the OIC website)? If on expiration, the option is in the money, it will be either automatically exercised, or ...
0
votes
2answers
70 views

Why call option price increases with higher implied volatility

As per the BS model the value of a call option is directly proportional to the implied volatility. Without getting into the derivation of the BS equation, is it possible to intuitively understand why ...
0
votes
1answer
50 views

Options trading volume vs moneyness

Why options have a higher trading volume when they are at the money? I can imagine people getting interested for ITM options because they have intrinsic value and also OTM options because they are ...
1
vote
1answer
30 views

Options price vs implied volatility - who drives who?

In this article we have: In contrast, IV is derived from an option’s price and shows what the market “implies” about the stock’s volatility in the future. Implied volatility is one of six inputs ...
1
vote
1answer
36 views

Would an ESOP issue physical shares or stock options (call options) to participating employees?

The ESOP (Employee Stock Options Plan) has the word 'options' in it. Is it the same "options" as in "futures and options', i.e are there physical company shares held under the ESOP in an employee's ...
-2
votes
1answer
67 views

Why wouldn't an option's last trade price be between the current bid and ask? [duplicate]

In the option table for SPY there is a column called 'Price' and a column called 'Bid' and a column called 'Ask'. If I wish to buy a call option, I need to pay a premium. Which column is the premium ...
2
votes
1answer
81 views

What kinds of financial assets have a fixed payment and finite time?

Which kinds of assets have the following properties? Can be bought or sold in some market Pay some pre-specified amount if a pre-specified (but in the present uncertain) event occurs Has fixed ...
3
votes
1answer
98 views

How are stock options priced?

I was reading the wikipedia article about the Black-Scholes model, and it says this: "The key financial insight behind the equation is that one can perfectly hedge the option by buying and selling ...
3
votes
2answers
142 views

How to sell option with no volume

If there is no volume on options you want to buy/sell, should you do any transactions with those options? Here is my scenario: I recently bought two puts of an industry ETF. A few days later it ...
7
votes
3answers
192 views

How does one typically exit (close out) a large, in-the-money long put option position?

I'm long some puts on a stock that has dropped a great deal. I've made $400,000 on an investment of $100,000. The question is, how do I exit? I can't really sell the puts because there isn't enough ...
5
votes
2answers
176 views

Options: Letting it expire or sell when profiting?

Do you let your options expire or would you sell it before you let it expire if you're profiting (meaning you're in the green - market is going towards the correct direction you anticipated). If you ...
1
vote
2answers
108 views

What would the broker do about this naked call option?

Let's say there is a stock of ABC currently at $8, and I sell a (naked) call option on it, with a strike price of $10 and expiration in two months. Suppose my broker lets me do this if I have 50% of ...
3
votes
1answer
115 views

When offered options as part of a package from a 2 year old startup, how is the strike price derived?

When startups hire new senior people I understand that it is common practice to offer options, often over a period of 4 years. However, the actual value of these options will depend highly on the ...
0
votes
1answer
66 views

Who writes option contracts and when do they get written?

When a person A decides to sell to open an options contract through his / her brokerage, I always thought that this results in an options contract being written on behalf of person A by the brokerage, ...
0
votes
0answers
91 views

Black-Scholes model and options evaluation

may someone explain me how to use a Black-Scholes model in order to identify if a defined option is a valuable investment? Thank you in advance.
1
vote
4answers
160 views

Why are options created?

At the moment I have to juggle with basics of FX OPTIONS. As for every other financial instrument that we use today, those have been invented as an answer to a question/bottleneck/problem one might ...
0
votes
2answers
66 views

Are there any investment strategies which take advantage of an in-the-money option price that incorporates no “time value”?

I'm not sure if "time value" is the correct term, but if an option (still at least several months from expiry) is trading at the difference between its underlying stock's price and its strike price, ...
3
votes
2answers
102 views

Looking at Options Liquidity: what makes some stocks so attractive for options traders?

I've noticed that options volumes can vary dramatically between underlying securities. What makes some stocks (e.g. AAPL, BAC) so attractive for options traders?
2
votes
2answers
100 views

Who gets the periodic payments when an equity is sold on an repurchase agreement?

I am trying to understand how repos work. It is my understanding that selling equities with the promise of buying them back at later time is called repo (short for Repurchase agreement). If one ...
2
votes
1answer
139 views

How does selling rights issues work in practice?

I read the article Understanding Rights Issues, but I don't understand how the selling of those rights issues works in practice. Do you simply get call options you can sell on an options exchange? Or ...
6
votes
1answer
74 views

Collecting Dividends while insulating volatility through options?

Is it possible to use options to collect dividends on stocks while insulating yourself from the volatility? If so, how? e.g., If I bought 100 shares of a REIT but didn't want to expose myself to ...
6
votes
2answers
220 views

Do the proceeds from selling an option immediately convert to buying power in a margin account?

In a cash account, the proceeds from the sale of any security will be held until settlement; for options, this is effectively overnight. One can sell an option on one day, and then use the funds the ...
0
votes
1answer
77 views

What is the difference between a structured collar and a normal collar in finance?

How is a structured collar different from an ordinary collar? I failed to find information about the difference online.
2
votes
3answers
119 views

What is a good price to “Roll” a Covered Call?

For an already initiated Covered Call, I wanted to ask if there is an optimal price to roll? For instance, if I buy/write a stock worth $10 with a strike price of $12, I can be faced with 3 scenarios ...
0
votes
2answers
155 views

Black & Scholes article : option pricing

I am currently reading the famous article by Fischer Black and Myron Scholes called 'The pricing of Options and Corporate liabilities'. Just at the beginning of the article, they go on and explain ...
5
votes
4answers
165 views

How do I buy an option that doesn't exist yet?

For example, the latest option date on a particular stock is Jan 2014, but I want to buy an April 2014 option. According to Google Finance, none exists. Is there any way I can place any order for ...
5
votes
3answers
172 views

How does the process of “assignment” work for in-the-money Options?

Consider the following scenario - I have a covered call for XYZ for this month's expiration as XYZ May 18 25 Call. On May 18, XYZ is trading for $28, with the option listed above at $3.3. If I ...
5
votes
3answers
215 views

Why trade futures if you have options

At this link:http://www.investopedia.com/ask/answers/09/options-vs-futures.asp they explain the difference between futures and options. It seems futures is an obligation while options is an 'right ...
2
votes
3answers
118 views

Why do some symbols not have an Options chain for specific expiration dates?

In an attempt to generate income from holdings, I generally screen stocks that trade options regularly. In my research, I have noticed that certain stocks have weekly options - but not always. For ...
3
votes
2answers
137 views

What risk of a diversified portfolio can be specifically offset by options?

I have been reading articles on portfolios and options. It seems options are used to hedge portfolios for multiple risk factors. I would like to know why options, and why not futures? What is the ...
1
vote
1answer
3k views

How to calculate the standard deviation of stock returns?

I'm trying to learn the the Black–Scholes option pricing formula and one of the elements of that formula (according to http://bradley.bradley.edu/~arr/bsm/pg04.html) is the "standard deviation of ...
3
votes
2answers
105 views

Execute or trade an options contract?

Take this call for example: FIO Jan13 22 Call Let's say this Thursday the stock goes to $23. Here is my math: Cost of option: $35 Cost of stock bought at $22: 100x$22 = $2,200 Thursday price of ...
1
vote
3answers
233 views

Specifically when do options expire?

Take these calls for example: Call Time of expiration SBUX Jan13 55 Call 2012-01-18 4PM EST FIO Jan13 22 Call 2012-01-18 4PM EST FB JanWk4 32 Call ...