Questions tagged [options]

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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What are alternatives to Black-Scholes model that doesn't assume random walk behavior?

I've recently started binary options trading as a hobby and I want to know how brokers decide the return rates on binary options. I asked this Question and I tested the model proposed in the answer. ...
2 votes
4 answers
124 views

What are the main criterias of brokers when giving return rates on binary options?

I've recently gotten into binary options trading. I've tried multiple brokers like deriv, IQ options,Pocket options etc. What I want to know is how these brokers give the return value for a winning ...
-1 votes
3 answers
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IV applied to Buying Vs. Selling Option Contracts!

Is low IV (Implied Volatility) good for selling or buying options?
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1 answer
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Does Sell Call/Sell Put affect a share price

I am using a option flow provider that cost about $99 a month. Its filter by default only trigger on "Ask/Above Ask" for call & put , but Bid/Below Bid (namely sell call/sell put) is not ...
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1 answer
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How do you analyse components of Index option to help you get more accuracy while trading options?

Suppose, you trade in options, Option index comprises of Many stocks, so how do you analyse those stocks in order to determine the movement of price in options while doing intraday trading?
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1 answer
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How to Roll Put Options (Buy to open)? (Bought to Open)

I have a put option that I bought to open but the market has moved against me. So I'm looking for a way out of the contract other than taking a huge loss. I want to know my options for rolling them ...
0 votes
1 answer
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What is the benefit of scalping options on short intraday time-frames rather than trading large equivalent stock positions?

I see a lot of traders on fintwit (to name a few: @UmarAshraf and @RealNourAtta) using ITM or 40-60 delta OTM options to place quick day-trades on 1-5 min charts. They're out within seconds, minutes, ...
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Company options, price gone down but value gone up - is it a good deal?

This summer I signed a options deal with the company I work for that gives me the rights to buy shares 3 years from signing date. The deal is that I have to rights to buy X shares to price at signing ...
5 votes
3 answers
707 views

If each option's strike price has different implied volatility what does IV means?

After spending 2 days researching I realized not many people know how to answer this, and most answers going around and not direct. I know that 20% implied volatility means 1 standard deviation ...
3 votes
3 answers
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How options affect the index?

I am not able to get technical/logical reason behind following scenario. Can you please help me to explain the reason behind it? Context: Group of stocks makes the index. It means Index is dependent ...
1 vote
2 answers
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Mathematically precise explanation of buying power

Can someone please provide a mathematically precise description of how buying power works in a brokerage account? Everything I can find online is too dumbed down to be precise enough that you could ...
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1 answer
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Are premiums from options taxable at assignment or sale of the security?

If I write puts that end up assigned, meaning I purchase the underlying security, are any taxes generated by the option in the year when it gets assigned? Are taxes only generated when the underlying ...
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Buying back a covered call ; did the tax law change?

Consider a situation where an investor owns a stock for over a year and sells calls against it that expire in about 90 days. You can assume that this is a qualified covered call for tax purposes. ...
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1 answer
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What happens to short PUT and short Call options on acquisitions. e.g Twitter

Currently Twitter is being acquired by Elon Musk. As now the deal is likely to go ahead. What happens to the seller of Call options ( suppose some one has sold call for $60 strike expiring in June ...
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2 votes
3 answers
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Why did my put lose value overnight

I bought a put option yesterday 10/20/22 with a strike price of $26. The price of the security was at $28.00, and the expiration set for 11/18/22. The security price dropped to $20.00 overnight. Why ...
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Is there a way for me to benefit from a call option I bought before a reverse split even if I'm out of the money?

I bought an "option to buy" contract of 100@0.5 for a 0.10 premium. $60 breakeven for 100@0.5. Unfortunately the company had a 1/15 reverse split and now my contract is for 6/100 @0.5. Which ...
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0 answers
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How is implied volatility on future treasuries used to expect Forex volatility?

I was listening to some traders talk amongst themselves. One emphasized the importance treasury implied Vol as a useful indicator for forex vol/trading. I don't totally see the connection. I have a ...
1 vote
2 answers
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How can I buy an option with no open interest & order-book orders?

I understand that when buying an option through an exchange, you get matched with someone selling the same option in the order book, and the trade occurs. Now, let's suppose that through my broker I ...
0 votes
3 answers
153 views

How can option seller lose unlimited money?

I hear that option seller can lose unlimited money, but how can option seller lose more than he deposited as margin? Does he only lose the margin he deposited to sell option or unlimited? Please ...
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0 answers
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'Inversion' of option chain: calls are more expensive than puts above the strike price! GME

Over the past two days there has been a weird phenomena on GameStop's options where the call options are more expensive than the put options above the strike price. I would have imagined that some ...
0 votes
0 answers
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Understanding the Call and Put options premium change wrt base index for morning 5 minutes

I was watching the graphs for call and put Nifty options for the first 5 mins for the date 29 Aug, 2022. What I noticed is that even though the Nifty 50 index chart for the first 5 mins was doji ...
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1 vote
3 answers
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How does inflation affect options prices?

Does inflation have any effect on options prices? If inflation increases, what will happen to the prices of puts and calls? My guess is that higher inflation will lead to higher interest rates, and ...
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1 vote
1 answer
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How option writers influence share price

How do the option writers influence share price? I have heard about short covering but it happens only in FNO how can it help the stock price to up since the shorts are built in FNO and its derived ...
1 vote
2 answers
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How to estimate or determine leverage from strike price on ITM call option?

In this text 4x leverage is mentioned: "ITM call options have a strike (X) below spot price (S). ITM call option position is determined by aiming for ~4x leverage. The position size is set at 33%...
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1 answer
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How to calculate break even price on delta hedged portfolio?

The underlying currently trades at 10. Suppose you have a portfolio consisting of: 1 Call at strike 11 with premium 0.4 A short position of 25 shares Calculate the break even prices of this ...
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2 answers
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About getting out of a long PUT option trade

I think about making my first options trade and after studying a bit, I couldn't find answers to some of my questions. So here I am. What I want to do is buy a PUT option on a stock that I speculate ...
0 votes
1 answer
83 views

What's the negative about buying contracts 1 month out when scalping options? (Is it buying same day or 2-3 day contracts are way cheaper?)

What's the negative about buying contracts 1 month out when scalping options? (Is it buying same day or 2-3 day contracts are way cheaper?) I don't want Theta to negatively affect my gains.
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Why IV are moving opposite to each other?

Please refer to the figure below, the graph is of European-style options of call side IV and put side IV at the same strike and same expiry. The graph is not of some stock but of an index. Also, this ...
0 votes
1 answer
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What effects does a change in IV on the call side have on the put side?

In a European type options market, consider this scenario, where someone starts to buy call options very aggressively which increases call IV rapidly. At the same time, the underlying price remains ...
0 votes
2 answers
656 views

How to calculate the number of trades in the market?

Is there any way to calculate the number of trades in an options contract, if the following data is available- Volume Open Interest Change in open interest Underlying Price Implied Volatility Total ...
2 votes
2 answers
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Why do implied volatility changes at different strike prices exactly coincide with one another?

Please see the image of the Implied volatility of different strike prices separated by 100 points. This is the recorded data of the actual market. As it can be clearly observed that the Implied ...
1 vote
0 answers
82 views

What option Greek is responsible for this?

Suppose you’re day trading and the underlying is going up. You have a want a put though as you think it’s going down long term. If you bought a 0DTE put, and the underlying moves in the opposite just ...
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1 vote
2 answers
120 views

will my brokerage account receive some stocks after someone exercises put options that I wrote?

I have some basic knowledge of how options operate. I have limited practical experience buying calls, and puts. I never tried shorting options, and before doing so, wanted to clarify some basic ...
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0 answers
53 views

How are SPX index option prices determined in the 15-minute period after the close?

There are SPX index options that expire every single day now (Mondays, Tuesdays, Wednesdays, Thursdays, and Fridays). I know that SPX options will trade until 4:00pm ET on the day of expiration. ...
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0 answers
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Why do the quarterly "PM settled" options for the S&P 500 futures have about 1000 points between each strike price?

I'm looking at the options chain for the S&P 500 futures. Almost every option contract I look at, whether it's a daily option, weekly option, monthly option, or quarterly "AM settled" ...
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0 votes
1 answer
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Can I take profit in option trading if

If the current price of a stock is at 2000 and I take a call option buy at strike price 2100 weekly expiry with 80 ltp. Suppose now ltp increases by 5 points and yet the price does not go above 2100, ...
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1 vote
1 answer
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Aren't options priced asymmetrically for Inverse and Leveraged ETFs, for the same underlying index?

I ask merely about pairs of Bear (Inverse) and Bull (Leveraged) ETFs for the same underlying index. The Bear ETF's price shall be bounded below by 0. But the bull ETF's price is unbounded. But doesn't ...
0 votes
1 answer
63 views

Best approach to select strike prices for an Iron Condor?

Options beginner here. I'm aware of three popular ways to select strike prices for Iron Condor. Select strikes such that they are equidistant from the CMP. Select strikes such that the they form a ...
0 votes
1 answer
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How do I close a put option when the company is about to file for bankruptcy?

I opened a put options by selling so I must buy to close. The company I have the open option position with is about to file for bankruptcy. How should I go about closing my put option. What's the ...
12 votes
9 answers
4k views

Does it make sense to repeatedly increase your limit order price in small increments until your order fills?

Whenever I buy a security, I always use a Limit Order. Just to be safe, I input a price just below the Bid Price, e.g. 21.80. Why? In case the spot price dips suddenly! See below. This cheap trick ...
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0 votes
2 answers
74 views

Can American Option Be Exercised After It's Not ITM Anymore

If an (American style) option enters the in-the-money price zone on a day while the person holding the options contract isn't paying attention to the market, and later on (let's say the next day), the ...
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1 vote
0 answers
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Are VIXW options PM-settled like SPXW?

Cboe explicitly defines the difference between the options on SPX as AM-settlement and SPXW as PM-settlement, but for VIX and VIXW, they say they're both AM-settled. I can see in my trading platform ...
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3 votes
0 answers
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How can I bet against a particular stock in relation to the market?

I’ve heard people doing spread trades when they think one stock will do better/worse in comparison to another stock or index. I’m looking for details on exactly how this is done. Is there a particular ...
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1 answer
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how to sell short - buy/sell to open/close

I'm intstd in selling short as there's a stock I think will drop, but i've never done it and am filled with trepidation. I head to options on my trading site and off the bat seem to have five......
0 votes
1 answer
133 views

I've been making a lot with options trading/pricing, but is it just luck? [closed]

So I've been trading for a while now, but after my internship, I learned about the different types of option pricing models like JumpDiffusion and CubicSpline. So I have begun trading both relative ...
0 votes
1 answer
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How would I calculate the wash sale permanently disallowed?

If I close a put position at a loss in an after-tax account and buy 1 share of the underlying in an IRA within 30 days, how much of the loss is permanently disallowed according to IRS wash sale rules? ...
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1 answer
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Rights vs Warrants vs Options

Why would a company issue rights instead of warrants (and vice versa)? Why would a trader or investor buy/sell rights instead of warrants or options (i.e. which situations make one of these more ...
0 votes
1 answer
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Fair value of common stock in stock options public company

I'm looking at $TOST 10k. When I go to page 140 it says this for their stock options: So you can see from the above image that they say their weighted average fair value of common stock was $17 at ...
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1 answer
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Please explain to layman — OCC Memo 50218, dated March 22 2022 — on VanEck Russia ETF (RSX) options?

I bought put options on RSX that shall expire April 1 2022. Obviously, I want to sell them for cash through my discount broker, Questrade, as soon as possible! I fail to understand anything in https:/...
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1 vote
1 answer
26 views

Options expiration dates: frequency offering?

I am starting in options trading and noticed that some underlyings have more options offerings in regards to the expiration dates; for example, SPY has Mondays, Wednesdays and Fridays weekly options, ...

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