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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31 views

Options Valuation and Pricing

Please comment on solutions. TYZ share trades today at £4 per share and the risk free rate is 10%. We are interested in pricing an one-year call option with a strike price of K=4. We begin with a ...
1
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0answers
22 views

Do I need to close out an in-the-money short straddle?

If I am short both a call and a put with the same strike on the same security, what happens if I let this position expire in-the-money? How much, if any, cash would I need to have liquid at ...
0
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1answer
22 views

Why does option with lower delta move more?

Shouldn't an option with a lower delta move less than one with a higher delta? The spy 208 jan put option has a lower delta than the 209 jan put. Why does the 208 have a larger range? low ...
0
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0answers
20 views

Choosing a strike price when you sell a short combo

Often different stocks that I want to short are not on my broker's "easy-to-borrow" list, so they are unavailable for shorting. A couple weeks ago I got serious about option trading and I found out ...
3
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2answers
196 views

How to sell a worthless option

I have a call option that will expire as worthless in January but I'd like to sell it now and realize the loss this year to lower this year's capital gains taxes. I would be happy to dump it at $0.00 ...
2
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1answer
61 views

How does a delta neutral portfolio make money

This is a really basic question,so I apologise. If I have a delta neutral portfolio consisting of an option and its underlying, such that any move in the option is cancelled by an opposite move in the ...
0
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1answer
20 views

Clarification on options jargon regarding spreads

Is it true that a bull put spread is the same as a credit put spread. Because if I am bullish, I wont be buying the put spread, I will be selling it, so it has got to be a credit spread. Similarly , ...
0
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1answer
21 views

Putting a calendar spread as a limit order

If I want to put on a calendar spread as a limit order at interactive brokers, am I allowed to specify a limit price for the spread, or do I need to specify limit prices for each of the individual ...
1
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2answers
37 views

Is the phrase 'sell premium' another way of saying 'sell an option'

In options lingo, when people say 'sell premium' or 'short premium', they pretty much mean selling an option, correct? i.e Sell premium is just another way of saying 'sell an option'
1
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1answer
26 views

Trade options on index or the ETF that tracks the index

What is the criteria one should use before deciding on an underlying to trade options on: 1.Options on SPX (Cash settled, European style) 2.Options on SPY ( Settled in SPY shares, American style) ...
0
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1answer
28 views

Are option contracts subject to mark to market rules

When I buy or sell an option contract, am I subject to futures style mark to market rules...i.e if the position moves against me, will the broker issue a margin call to put up additional collateral, ...
0
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1answer
24 views

Exercise an out of the money option

For listed options in NYSE,CBOE, is it possible for an option holder to exercise an option even if it is not in the money? What about early exercise for OTM American option, is it possible? Under what ...
1
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1answer
48 views

How does AMT/state taxes work for stock options in California?

I'd like to know how to roughly calculate tax for stock options, for the following fictitious scenario: Suppose Little Susie joined a rare private company in California as a normal employee, and ...
0
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1answer
27 views

Time premium of at the money options

What is the reason that at the money options have the greatest time premium? I am not mathematically inclined, is there a way to understand this intuitively?
0
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1answer
96 views

training for would-be active investor

I've had an account set up with an online brokerage, and through random luck I've managed to hold onto most of my money and even make a couple of dollars. I currently max out my 401k, and have for the ...
0
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0answers
15 views

Covered call and put options as separate trades

Let's say I write a covered call and a buy separate put option. After a period of time, the call expires, leaving me with the underlying stock. Thereafter, the market price went down and I can ...
0
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2answers
48 views

How to tell if an option is expensive

How to tell as a rough estimate if an option is expensive or not? For stocks, you can compare P/E multiples with similar stocks to estimate whether a stock is expensive w.r.t its sector. But with an ...
0
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0answers
20 views

Volume of at the money options

What is the reason that at the money options have the highest option tradng volume? Is it just a coincidence?
0
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0answers
16 views

Can a weekly and a monthly option expire on same date

Does the expiration date of a weekly option and a monthly option ever coincide? What about the expiration date of a monthly option and a LEAP? I.e if there is a monthly expiring in the third week of ...
1
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1answer
27 views

What happens to the put option (longer expiration) of a collar if the call gets assigned?

Assuming a collar strategy where I buy the underlying stock with a short call and long put option on it. Would the call be assigned away like a covered call, leaving the put option viable or would the ...
0
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0answers
25 views

Online options simulator that shows Greeks of a option position in near real time

Is there an online software, maybe a downloadable excel that will allow me to put on a simulated option trade and show me day by day how my position is doing on the P/L curve, how my Greeks are ...
0
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0answers
41 views

Is an iron condor always preferable to doing a simple credit spread

What is the advantage of using a regular credit spread ( bull put or bear call spread ) over an iron condor? The profit in an iron condor will be at minimum be same as a simple credit spread( when one ...
1
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2answers
83 views

Do options always expire on third Friday of every month

The Yahoo finance link for SPY options Indicate that these options expire at close of October 31st. This is confusing because I thought options expire on the third Friday of every month. Oct 31st is ...
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1answer
34 views

Is the delta hedging technique of any use for a retail trader

As a retail trader, does it make sense to hedge an option position by taking an opposing position in the underlying? If I buy a long call and short an equivalent number of the underlying so that the ...
1
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3answers
33 views

does an option trading below parity always indicate an arbitrage opportunity

If an option is trading for less than parity, is it always a mispricing, waiting to be arbitraged, or are there other factors that can lead to this?
0
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1answer
48 views

If early exercise is a bad idea, why American option is more expensive than European [duplicate]

American options are more expensive than European options because they give the buyer the right to early exercise. But in a low interest environment, early exercise is a bad idea, for most retail ...
0
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1answer
37 views

When is an option a certain number of strikes in the money? e.g. “two strikes in”?

What does it mean when someone says:this option is one strike in the money or that option is 2 strikes in the money and so on and so forth? I understand in the money, at the money, and out of the ...
1
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1answer
142 views

Why does shorting a call option have potential for unlimited loss?

Referring to http://en.wikipedia.org/wiki/Option_(finance), for a short call: If the stock price increases over the exercise price by more than the amount of the premium, the short will lose ...
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2answers
40 views

How does delta of an option change with time if underlying price isconstant

In his book 'Option Volatility and Pricing', Sheldon Natenberg writes that if an option has a delta of 92 with 3 months to expiry; and then 2 months pass and the underlying contract does not change in ...
0
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0answers
35 views

Options contract calculator - for non-equities

All of my options calculators are within stock trading platforms, or readily found on the internet and require stock/index symbols. I am trading illiquid options over the counter, on an asset. I have ...
1
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2answers
85 views

Buying & Selling Call Options

So, I understand that if I write a call option and someone decides to exercise it before it expires, I agree to sell them the stock for the listed price on the option. I guess my confusion is, if I ...
1
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1answer
75 views

Profits vs. losses from stocks, options, and futures: separate, or combined?

Are stocks, options, and futures all considered part of the same basket for tax purposes? E.g., if one make some profits on stocks and losses on futures, does the IRS allow one to deduct the losses ...
1
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1answer
49 views

What are non-qualified stock options?

Most material out there on the internet assumes I already know some basics about stock, but I work for a US-company in the UK, while being from another EU-country. Last month I've received this e-mail ...
1
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1answer
87 views

Can a Covered Call be called away before the expiration date?

Scenario: If I hold 100 shares of XYZ, I can sell 1 XYZ call. Let's say the current price of XYZ is $50. What if I sell a call with strike price $45? Does that mean the underlying owner can call away ...
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1answer
130 views

What are some ways to mitigate the risks of covered calls?

When covered calls work, they seem great. However, there is a chance that the stock will tank, turning the 5% profit into a 50% loss. What are some ways of mitigating the risk of a stock dropping ...
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2answers
80 views

Large volume options sell

In Casino Royale, the villain trades put options worth USD 100 million and loses. My question is say if he had won, would he have been able to sell the USD 100 million worth of options? Say option ...
0
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1answer
69 views

Risk involved in buying LEAP put and selling short term puts against it?

Let's say company A is currently trading at 100. I bought to open 10 puts for company A at 100 strike price in Jan 2015. What risk am I exposed to by selling shorter term weekly puts (strike < ...
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1answer
89 views

A goldsmith's hedging strategy, simplified

A goldsmith has bought 100oz physical gold for his trade and payed $1300/oz. He is going to be ready to sell his jewels in 3 months from purchase. In order to hedge against falling prices of gold, he ...
7
votes
3answers
1k views

Am I understanding buying options on stock correctly

I'm just wondering if I am understanding Stock options correctly. Basically if I am watching stock XYZ. It's currently at $10 per share which I believe is low and should raise to 20 within 1 month. ...
2
votes
3answers
74 views

Why does a long/purchased call option have a long position in the option itself?

I am teaching myself some finance through a book. And I get confused by call/put options having short/long position in the options themselves or the underlying assets. For example, I understand the ...
1
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2answers
166 views

What is the effect of options expiration on equity pricing?

I often read on twitter that institutions will manipulate the price of stock x because it's options expiration day. By manipulating the price of the stock below the strike price, it's my understanding ...
3
votes
2answers
144 views

What happens to options after a stock split?

If an underlying stock splits, are the options just adjusted accordingly (i.e. quantity I own is multiplied, and strike price is divided)? For example, AAPL will have a 7 for 1 split soon. If I have ...
3
votes
1answer
118 views

What is a good service that will allow me to practice options trading with a pretend-money account?

I want to get a little more practice before I put my money on the line. I was using Paper Money from thinkorswim through school, but my account is bugged where the buying power will not update. The ...
3
votes
1answer
35 views

Short position with bullish outlook

I am just starting to learn about options and about puts and calls. Traditionally, I assumed that being short on a position means having a bearish outlook to the market. However, when you are an ...
0
votes
1answer
259 views

Why futures has a mark to market concept that is not present in stocks

A futures contract is traded just like a stock or an option contract. So how come a futures contract has the concept of mark to market whereas a stock or an option does not have this concept? IS it ...
0
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2answers
129 views

Can after-hours trading affect options pricing?

The question is targeted for symbols trading weekly options. For example, would Friday's AAPL after-hours trading affect the weekly options contract that are slated for expiration on that day? Or do ...
0
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2answers
57 views

Understanding option commission costs

In Interactive Brokers, they charge an option commission cost of 1.50 per contract. So this means if I sell an option, I only pay 1.50 and collect the full premium? It seems a bit too good, coming ...
3
votes
1answer
164 views

Why Gamma is highest for an option that is at the money

What is the reason that At the Money options have the highest Gamma? I understand that Gamma is the rate of change of an options price w.r.t the change of the underlying price (a.ka. the change of ...
2
votes
1answer
48 views

Probablity of touching In the money vs expiring in the money for an american option

As an options trader trading American style options, should one be considered with the probability of an option expiring in the money? Or simply the probability of the option touching the In the money ...
1
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1answer
228 views

How does a delta signify the probability of expiring in the money

I was watching this video on option greeks and the guy said (at 34 min): If an option has a delta of 34, it has a 34% probability of expiring in the money? Is it possible to understand it intuitively ...