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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12 views

Free or cheap data source for the current European Options prices? [closed]

Is there a free or cheap (<15$/month) data source for the current (not historical) for European Options? Something like Yahoo Finance option page, with option chain contract prices. It's ok if it's ...
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9answers
27k views

Why does a call option's price increase with higher volatility?

As per the Black-Scholes model, the value of a call option is directly proportional to the volatility. Without getting into the derivation of the BS equation, is it possible to intuitively understand ...
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2answers
750 views

How exactly is implied volatility assigned to an option's strike price?

I'm trying to understand implied volatility (IV) better. Recently, I was looking at $YUMC's option chain (date: 07/10/2017) and in particular the 27.5 strike price with an IV of 0%. I'm trying my ...
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1answer
71 views

What to do with a call I sold

I own 300 shares of NCLH, I sold a call last Monday with strike price of $16 when the stock was at $15.8 for a premium of $115 (for the 3 calls). The Call expires tomorrow and I don't know what I have ...
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2answers
70 views

Is an ITM option bought/sold to close in addition to being assigned?

I'm a little unclear on what happens to in-the-money options on expiration. I know the option will get assigned, but does it also need to be bought/sold to close? For example, say I sell a covered ...
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1answer
65 views

How can I reliably “transfer” shares to another person by using market transactions? [closed]

Suppose I wish to transfer 100 shares of a $2,000 stock to person X (a trusted person). I have been holding this stock on behalf of person X for a few years now. Further suppose that it is infeasible ...
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5answers
690 views

Why does financial investor bother to buy derivatives and then hedge the position?

I am recently studying mathematical finance, and I am not really familiar with how the financial system works. This might be a naive question: when reading some books on mathematical finance, "hedging"...
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2answers
58 views

Put option prices for IWM and SPY decreased on Jun 26, 2020

I own IWM and SPY index puts whose prices did not rise June 26, 2020 when both the IWM and SPY fell by more than 2%. For example: IWM 10/16/20 $95 put 1.92 x 2.01 B/A 1.93 close, down 0.05 SPY 12/...
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2answers
65 views

“Sell To Open” a Call or “Buy to Open” a Put when Trend is Bearish

I trade options. I "Buy to Open" and then "Sell to Close". I don't exercise them. I have never traded by "Sell to Open" followed by "Buy to Close", which I ...
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1answer
75 views

Why is this option strategy's lower bound $50?

Why is the payoff 0 when the price drops under 50? When we sell the short call, we get $60 and we need to cover our position so if the price drops to let's say $40. We don't need to execute the option ...
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2answers
99 views

If option prices are publicly quoted on an options exchange, why do people use Black-Sholes to estimate their price?

I always wondered why the Black-Sholes-Merton model was used to estimate the price of European-style options when their prices are available on quoted exchanges? I think I am missing something big ...
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3answers
244 views

New to options trading and need help understanding an options spread risk graph. What am I missing?

Suppose the stock is $41 at expiry. The graph says I will lose money. I think I paid $37.20 for (net debit) at this price. I would make money, not lose. What am I missing? Thanks for all your input, ...
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1answer
36 views

Calculating maximum loss on options spread including early assignment and margin calls

Most trading platforms provide a maximum loss calculation for options spreads, but this does not account for the possibility of early assignment which could lead to losses from margin calls, overnight ...
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1answer
24 views

Do compound options trade on exchanges or do they only trade over-the-counter?

Do options on options (i.e. compound options) trade on derivatives exchanges? Or are they only traded over-the-counter? If they do trade on exchanges, which exchanges do they trade on?
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1answer
26 views

Options Strategy for Calculating Limit Price on a Vertical Spread

Is there a best strategy for calculating limit price on a vertical spread? Using the average of the bid and ask prices seems to lead to a lot of orders that do not get executed.
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2answers
28 views

Wash sale and Options?

I'm confused on what it means to for security to be substantially equal? For example say I buy a call and then sell it for a loss before expiration. If I buy another call in the same underlying at a ...
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5answers
167 views

Buy Stock and immediately sell a call

I am new to options trading (<1 month). I recently sold a rental unit and I have been slowly allocating the cash into stocks. I want to utilize options and I need some help to make sure I am not ...
2
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1answer
35 views

Is it plausible for the bid / ask spread to move upward with zero volume and an option expiring worthless on the same day?

I'm studying historical options quote data, experimenting with different trading strategies and here's an example of what information I have for every option, recorded hourly: | [ 02-20-2004 16:00 ] ...
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2answers
40 views

If I write an option contract, sell it and then buy it back, will it still be an open interest?

If the original writer of an option contract buys it back, does that mean a reduction in the open interest? To my understanding, option contracts are written and then sold/traded/bought back. The ...
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3answers
2k 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 ...
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1answer
63 views

Cheating the market by exploiting the difference between stock and option settlement periods?

This is sort of a follow-up question from: A few questions about stock investing After reading Baerker's answer, an interesting thought came to mind. Can a market manipulator exploit the settlement ...
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1answer
40 views

Why is a put on yields equivalent to a call on bonds?

Nassim Taleb makes the following assertion in Dynamic Hedging: A put on yields is a call on bonds, a matter of confusing importance. But I struggle to understand why that is the case. If I buy a put,...
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1answer
26 views

Call backspread as being exposed to volatility

I watched a video about going long volatility within a portfolio via a call backspread. I previously looked into this via the "straddle" which is independent of the direction of volatility, ...
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1answer
25 views

Order Type to sell options a few days before the Expiration

With the stock at $175, a novice trader buys 1 call option: Option Price: $20 Strike Price: $200 Expiry: December 15, 2020 Cost: $4,000 He wants to SELL TO CLOSE the option on December 1st, 2020 ...
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2answers
235 views

If I am buying a stock why don't just I buy an in the money option?

I'm a 15 year stock market investor here who is very new to option trading (two weeks). I have a full understanding of how options work (complicated needless to say) and I have realized their ...
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4answers
303 views

How can “regular people” get 700k in debt on RobinHood

There was recently a story of a suicide of a trader(20 y old student) that accumulated 700k of losses. I am not asking here about a morality of this setup, I am just curious of the mechanisms... Why ...
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2answers
63 views

What will happen if CALL OPTION expire IN-THE-MONEY without sufficient funds?

Suppose a novice trader opens an online account with $5,000 with online trading platforms like e*trade, Ameritrade or Robinhood. With the stock at $175, the trader buys 2 call options: Option Price: $...
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2answers
37 views

Does option “automatic exercise” take commission into consideration?

Automatic exercise is a procedure implemented to protect an option holder where the Option Clearing Corporation (OCC) will automatically exercise an "in the money" option for the holder, ...
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1answer
41 views

How long does it take to exercise an option?

If I have a call option and exercise it today will I be able to receive the shares immediately to sell them?
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2answers
49 views

Why is there “volatility” within this options generator?

At this webpage https://optioncreator.com/ one can choose volatility. I dont understand what that is suppose to mean, any ideas?
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2answers
151 views

How can I affect implied volatility of an option?

Implied Volatility represents the actual above-market premium an option contract trades for at any point in time, but it changes in mysterious ways. If I wanted implied volatility to be higher, could ...
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2answers
3k views

How do naked options work on Robinhood?

I just answered a few questions on Robinhood and suddenly I am able to trade options without holding any stock of the underlying security. I assume there are a lot of people that have the same ability....
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1answer
37 views

OTM, Long Put Options in an All-Stock acquired company - did they die?

I have a small, few hundred dollar position in an OTM Strike ($22) put option expiring Jan. 2021 for KEMET (KEM). The company was acquired by Yageo recently. Yageo trades on the Taiwanese stock ...
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1answer
89 views

What is the effect of a short stock position on the value of an option?

I'm reading the book "Option Volatility and Pricing" by Natenberg and there is a paragraph I'm having trouble understanding. Chapter 7 (Risk Measurement 1), Page 98, Paragraph 2: The value of a ...
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1answer
68 views

Can you borrow shares from broker to cover naked call?

If I sold a naked call, and the buyer exercises it. Can I borrow the shares from the broker to fulfil it?
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1answer
52 views

How to track options trading in GnuCash

I recently started experimenting with a bit of stock trading on the side – put aside a bit of money, small enough I could afford to lose it entirely, in an ETrade brokerage. I've been keeping my own ...
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1answer
50 views

Buying a naked put option based on price speculation

I am very new to options, and was wondering about a scenario to generate income based on speculative price movement in the future. For example: SP-500 ETF currently trading at $200 Speculate that SP-...
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4answers
7k views

Who buys these significantly out-of-money options?

The following is the screenshot of the NIFTY 50 option chain. It is taken from the following link. Why are these people buying these significantly out-of-the-money options? In this case, it's the ...
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1answer
45 views

What financial intrument pays out a fixed amount when a strike price is reached?

What is the name of the financial instrument that pays out a fixed amount when a strike price has been reached? For example, the contract may stipulate that I get paid exactly $100 when the S&P ...
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2answers
125 views

How can I buy options for a stock that isn't listed on an options exchange?

I looked up various data sources, but I was unable to find the option chain for a specific stock. As an example, options for Berkshire Hathaway Class A stock (BRK-A) do not appear to trade on an ...
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2answers
4k 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, ...
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6answers
22k views

What does it mean to long convexity of options?

In this Bloomberg video, Curnett talks about volatility and the convexity of options. Specifically, he says; "The spread between the VIX sitting there at 20 for a period of time and this realized ...
2
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3answers
72 views

Where Can I Find Personal Advice for Options Trading? [closed]

I have spent the past several weeks researching options trading on the web. While I am confident with the key concepts, I feel that I could get caught out by technicalities when executing my first ...
0
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1answer
69 views

negative delta for bull put spread

I am working on bull put spread. Currently the spot is way below both the strike prices. So one strike is deep in the money and other is in the money. Net position delta retrieved from Bloomberg for ...
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1answer
262 views

Expected stock price move using IV

From this post https://www.projectoption.com/expected-move-explained/, he uses the following formula to calculate a 1 SD move in the stock: How do you know which stock option to use for this? For ...
5
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3answers
7k 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 ...
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2answers
89 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 ...
3
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2answers
169 views

Picking a hedge option

In picking a hedge option, how important is it to buy one where the implied volatility isn't much higher than actual market volatility? Should one look at the option chain and find those options ...
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1answer
105 views

FX options for retail trader

I would like to trade options on the FX market, say EURUSD and GBPUSD. I have seen that there are options on the CME that have FX futures as underlying and also some options on spot on the ...
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5answers
2k views

How liquid is options market?

My strategy involves making profits from an increase in implied volatility on long straddles/strangles. Enemy: Time decay I am aware that the time decay accelerates. I read that for a 9 month ...

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