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.
109
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Options for dummies. Can you explain how puts & calls work, simply?
I never understood Puts or Calls. Could anybody explain it like I were a child?
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10
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Why are American-style options worth more than European-style options?
Why are American-style options worth more than European-style options?
I realize I can exercise American-style options anytime before the
expire, but I can only exercise European-style options ...
user1731
8
votes
2
answers
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What happens to options held during a reverse stock split?
I held 1 put option for 100 shares of USO that expires on May 8. Yesterday, USO underwent an 8:1 reverse stock split. My options are now for USO1 instead of USO, but what does that mean?
The strike ...
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3
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What typically happens to unvested stock during an acquisition?
I work for a publicly traded company that was acquired by another publicly traded company. I also own shares of "restricted stock units" for my company. All of my shares are scheduled to vest far ...
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8
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Exercising an option without paying for the underlying
As a follow up to my other question, I would like to know whether the following is possible:
I have $20,000 in my brokerage account
The price of a call option with $300 strike price is $5.00 (1 ...
- 237
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3
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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 ...
101
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6
answers
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Can someone explain the GME short squeeze situation to a non-stock trader?
GameStop Corp. (GME) stock is over $300 at the time of this post. I understand the 10,000 foot view of the story only: That some Reddit folks are buying up shares to squeeze a short seller.
But I don'...
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6
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Does the Black-Scholes Model apply to American Style options?
After reading the Wikipedia article on the Black-Scholes model, it looks to me like it only applies to European options based on this quote:
The Black–Scholes model (pronounced /ˌblæk ˈʃoʊlz/1) is ...
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4
answers
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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 ...
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2
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If I hold a long and a short position on the same option, do the contracts cancel out each other?
Suppose I sold an option on stock X, with strike price Y, and expiry date Z. Suppose I later buy an option on the same stock, with the same strike price, and the same expiry date. Do these two ...
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Does option delta predict expiration probability?
I've read that delta is a probability of option assignment. For example, if you have a put with a delta of -.70, there is a 70% chance the option will be assigned. If the delta is -.04, there is only ...
- 1,398
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1
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Index Annuities and synthetic duplication with options
I read a thread on another site about some six year index annuities called Structured Investment Options (SIO). They offer a variety of combinations of an upside cap with limited downside ...
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If a startup can always issue new shares, what value is there to stocks/options?
Since in most startups the board can issue more shares at will, what does it mean for an employee to own X% of the shares? When signing up, can an employee protect himself from the company printing ...
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2
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How do I bet that a stock price will not move?
If I believe a stock will go up, I buy the stock. If I believe a stock will go down, I short the stock. If I believe a stock will neither go up nor down, what do I do? How do I profit from a non-...
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2
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What happens to options if a company is acquired / bought out?
I have some out of the money options with pretty far off expiry dates (Jan 2013, for example). What happens if the underlying company is acquired before then, while I'm still holding the options? Do ...
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21
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6
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Please explain the relationship between dividend amount, stock price, and option value?
I consider myself a reasonably knowledgeable investor, but today was blown away by the fact that I didn't know that a stock's price is decreased by the amount of its dividend. To use a concrete ...
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Buying puts before dividends get paid out
This question is a direct extension of this question, which asks if you short a stock before the dividend pays out are you guaranteed money since the price should go down? The answer states shorting a ...
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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 $76....
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4
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What happens to an options contract during an all stock acquisition?
Let's say for the sake of the question you're given the following scenario:
Company BIG is trading at $10/share
Company SML is trading at $40/share
BIG reaches an agreement with SML for an all stock ...
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2
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How to get started with options investing?
I have never taken the time to learn about or trade options, and I'd like to give it a shot.
IMO, I am a reasonably sophisticated investor; I've been investing in one form or another since I was 11, ...
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At what time of day does time value fall off of a call option?
As days tick off of call options, time value decays. My question is does that happen automatically at 9:30AM at market open or does it get continuously deducted as the day ticks on?
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Why would someone want to sell call options?
I'm having trouble understanding why someone would want to sell call options. For example, if the writer of a call option owned the shares and they expected the share price to fall, why wouldn't they ...
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How to record a written put option in double-entry accounting?
I have been using double-entry accounting to carefully track my financial situation for a couple of years now, but I am just dabbling with stock options for the first time. I wrote a put option (sold ...
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Can you buy an option and immediately exercise it? Options delays questions
Assuming American Options
Can you buy a stock option and immediately exercise it - or are you only formally given control of the option at the end of the trading day? Would you be able to sell it ...
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3
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Options and exercise
Why do people exercise call options early? If the price of the stock rises above the exercise price, the profit from selling the option would be greater than the profit from exercising the option and ...
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votes
2
answers
432
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Why certain ETFs are popular( liquid) but Options on very same ETF are not
For example on comparing EEM/VWO , SPY/IVV/VOO etc and I always wonder why some ETFs are popular but options are not. I see a question How to pick ETFs that hedge against stock market crashes? that ...
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1
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Please explain this put option
Earlier today, I purchased 2 put options on GME. The opening price was around $295. The price dropped $30 in 45 minutes to below $265. Why am I not making any money? I looked at all of the put option ...
- 21
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votes
2
answers
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How could I calculate the probability of getting wiped out?
Last year I ran a mildly stupid/naive options strategy.
It involved picking 10-15 random companies, and then setting up put credit spreads on each one, expiring 1-2 weeks out. I prioritized high ...
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1
answer
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Selling short call against a long call (a LEAP) when the long call is already in profits. Is it Constructive Sale?
Let's take these hypothetical trades
On 08/01/2020: Bought AAPL Jan-2022 100C at $30 (Long call)
On 08/30/2020: Sold AAPL Jan-2022 110C at $50 (Short Call). By this date, 08/30/2020, before my short ...
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2
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Why hold calls until expiration?
I am reading a book on options basics. I am in a chapter on selling covered calls. The author says that buyers of calls almost always hold the calls until expiration.
Why is this? Here's how I ...
0
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1
answer
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How come none of the VIX ETFs track the index exactly? [duplicate]
For example the VXX ETF (https://finance.yahoo.com/quote/VXX) does not track the index exactly (https://finance.yahoo.com/quote/%5EVIX/)
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1
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IN KIND transfers that include covered calls
I have an RRSP that i transferred 800 shares to my taxable investment account along with it i transferred 2 covered call agreements each containing 4 contracts. When totalling and moving everything ...
0
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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 ...
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1
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When an option expires does that constitute a buy or sell
A similar question recently asked about stock sales and option buys triggering wash sale rules.
If an option expires, is that considered a buy/sale ?
What I mean is: let's assume I have a call ...
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2
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How OPTIONS are settled can be an eye opener and I hope I can get some answers
The only reason why I put it here is to find out whether I am a victim or just ignorant of the way brokers deal with option positions that were exercised. Whether I am a victim or just ignorant ...
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1
answer
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When to pay taxes on sold stocks or options?
I am a newbie to stock and options trading. I trade on Robinhood (I guess the tax system should be same regardless the platform). It would be great to have answers on these questions. Thanks in ...
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My out-of-the-money call options are near expiration and won't sell in the open market. What are my choices?
I had attempted to sell my contracts off today but was unsuccessful. They are currently OTM options and will expire tomorrow. What can I do to minimize loss and why was I unable to sell?
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1
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Is a Low Orbit Gamma Cannon illegal?
The recent/current GameStop situation with r/WSB vs Wall Street reminds me in some ways of the Low Orbit Ion Cannon, a tool in the 2000s that 4chan/Anonymous used to DDoS sites using the home ...
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Do companies sell puts when buying back shares?
Say company X has a share price of $80. They think their shares are undervalued, and their board approved a buyback of $1 billion. Can company X use the $1 billion to sell puts at $79, with the idea ...
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What is a stock warrant? How do warrants work?
What is a stock warrant? How do warrants work? I've been told they are similar to options; how? Then why not just call them options - what makes them different?
unknown
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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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9
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3
answers
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Buying an option in the money, at the money, or out of the money
How would one make trade-offs between buying a call option a few dollars ITM (in the money), ATM (at the money), or OTM. I mean I understand the plain dollar differences / calculations on the surface,...
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Deep in the money put options
I'm trying to make sense of this option:
Type: put
Expiry: 2021-02-05 (= this week's Friday)
Bid: 580.4
Ask: 584.9
Contract size: 100
Strike: 800
The underlying's last price is $225.
Buying this put ...
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Is there a good options strategy that has a fairly low risk?
Is there a good options strategy that has a fairly low risk? It doesn't matter if it's complicated, has several legs, and requires margin.
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Purchasing options between the bid and ask prices, or even at the bid price or below?
For those more experienced options traders, I'm wondering if you can share what you've found in regard to purchasing near, at or possibly below the bid. For example, yesterday in a slightly rising ...
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What are the odds of being assigned for a long dated in-the-money call option?
If I sell a 2-year future dated call option that is slightly in the money (For example if Citi today is $5.13, I sell a call option for strike price $5.00 at Jan 2013 - today is Jan 2011), what are ...
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4
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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 ...
- 15.9k
6
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1
answer
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why some brokerage does not allow uncovered (cash secured) put via online order?
In past, I had brokerage accounts with Vanguard and I have option level approved for writing uncovered put( Level 4). I could place covered call orders via the website. But to place uncovered put ( ...
6
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1
answer
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Are futures options eligible for the 60/40 tax rule?
How are options taxed when the underlying asset is a futures contract.
Futures contracts in the US have a favorable tax treatment known as the 60/40 rule, where 60% of profits are taxed at the long ...
- 20.2k
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1
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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 ...
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