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If the stock price ends up below the strike price, you've lost the premium. But because, in your hypothetical, the strike price plus the premium is equal to the current stock price, that means that if the stock price at expiry is above the strike price, it's the same as if you had just bought the stock. That is, you can pay the premium, and then pay the ...


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As you figured out, it's a diagonal spread. Buying a long dated call LEAP and writing shorter dated further OTM calls against it is often called the Poor Man's Covered Call (PMCC) because it has a similar performance to a covered call. The advantage of a PMCC is that since less capital is necessary, it has a higher ROI and lower risk (the price of the ...


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There's a lot of confusion and misunderstanding in the two answers and some of the comments, regarding lack of time premium in deep ITM options: The primary case is that if the implied volatility is low, there will be minimal time premium in deep ITM options. The secondary reason is that if there is a dividend coming up, option premiums adjust accordingly. ...


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1) Yes, you can buy and sell puts and calls on the day of expiration 2) If it was a directional long call buyer, the speculation was that AAPL could rise intraday, well above $270, thereby offering a large ROI on an inexpensive option. However, it's presumptuous to assume that all of this $270 call volume was speculative long trades placed that day. It's ...


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Can you buy PUT or CALL on the day of expiration? Sure. What will be this trader's speculation? The US Jobs reports was announced in the morning and the market went up and the AAPL floated at $270 between 12:30 PM and 3:45 PM. Most likely, either the buyer is speculating that the stock will move significantly during the day (assuming buying an ...


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Red - the 15 cents you collect by selling the put. You lose, penny for penny if the stock drops below $21. I am assuming expiration, not movement and getting out of one leg or both, early. Green - the 20 cents you sold the call for. You lose, penny for penny as the stock rises above $24. Purple - the net profit/loss for the entire trade. You profit a ...


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A stock that's at 50% of the strike price of an option you own, and only 2 weeks to expiration would take a huge gain to be in the money. I'd be surprised if it were trading at price you mention. The chance of it recovering in a year is slim. 2 weeks? Near zero.


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If you bought a two week $50 call for $5 with the stock near $50 and the stock dropped to $25 then in order to salvage $4.50, the stock is going to have to rally back to $50 to get near break even - probably even higher than that because of time decay. If the stock dropped to $25 with two weeks before expiration, you'd be lucky if the bid on your $5 call ...


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Per that article, I assume the trader bought options for a strike price of 2980. The index price dropped from 3120 to 3080, and the trader made profit on it. How is that possible? Per your comment: My understanding is that to make a profit out of selling PUT is only when the price is in-the-money. The problem is that you understanding is incorrect. ...


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Chemical Financial merger with TCF Financial during the summer. The old TCF options were adjusted and became TCF1 options. One contract of TCF1 now represents 50 shares of (New) TCF Financial Corporation common shares and cash in lieu of 0.81 fractional TCF shares. Sorry but I can't provide the link for you because I'm registered with the OCC and for ...


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In your 6 month chart, Delta went from $56 to $63 to $56 to $60 to $52 to $57. That certainly presented a number of opportunities to double your option money or better if you had the magical ability to figure out when to be directionally long or when to be short as well as how to avoid being long or short during August/September when DAL range traded ...


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As long as you have the appropriate levels of option approval then there's no reason why you can't do this (if the stock cooperates). Covered calls and short puts are synthetically equivalent which means that they have similar risk and reward. The risk with either approach is that AAPL drops a lot. Other considerations: If you pay commissions, by ...


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I have started doing option trading and as per my knowledge so far price of option rise or fall depends upon the delta. Sorry to nitpick on the wording but the price of option rise or fall does not depend upon the delta. Premium changes because of time decay, an ex-dividend date approaching, change in implied volatility, and change in carry cost. On a ...


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What you're asking is to sell the option when the price of the option drops $2 from it's highest sellable value, which is currently $3.95. That would mean that you sell it for $1.95 per share, or $195 less commissions, so roughly $194.33. Since it's a put, that's only going to happen if the stock price rises, which is the opposite of what you predict. ...


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Your loss is $14.00. 100 shares per contract = $1,400 loss


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Let me show you an example. You said current price $150 but at $199 (we will use $200 strike because strike prices comes in increments) you want to buy a put when stock is at $200 and sell the put when the stock is at $160. So fast forward....the stock is $200: 6 month put COST: $17.50 @ 200 strike (costs $1,750 per contract) (remember the strike price ...


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The day before expiration, the option will be trading for close to its intrinsic value (the in-the-money amount). At $175 it will be $20 At $157 it will be $2 plus a modest amount of time premium At $150 it will be worth zero To determine option price on December 20th, you'll need a pricing formula. You have three choices: Download the equations for ...


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Brokers are not involved in this equation. They are just intermediaries connecting buyers and sellers. It's the option sellers who bear the risk of naked options. Short options require about 20% margin. If breached, brokers will automatically BTC to cover naked positions (covered puts are not the problem). This scenario assumes that all option sellers ...


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It is guaranteed by OCC, if the seller does not full fill the requirement, then OCC will full fill the requirement. OCC becomes the buyer for every seller and the seller for every buyer, protecting its members from counterparty risk.


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When you short a stock, you are charged a borrow rate (interest). The rate can fluctuate daily and the amount owed accrues daily. You pay a borrow rate on all short equity positions. If your broker pays you interest on your cash balance, you'll earn interest on the proceeds of the short sale (many don't). Note that the borrow rate can be as low as 0....


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The Federal Reserve Board sets margin requirements via Reg T. For narrow based index options such as the VIX, it's: 100% of option proceeds plus 20% of underlying security/index value less out-of-the-money amount, if any, to a minimum for calls of option proceeds plus 10% of the underlying security/index value, and a minimum for puts of option proceeds ...


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The call option writer gets the option premium. If the option is exercised, the option writer gets the agreed price but bears their own cost of acquiring the underlying share. There may be transaction costs for each part of the process. So if the option is not called, the payoff for the option writer is: Payoff = OptionPremium - TransactionCosts And if ...


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The call seller has the obligation to sell IBM at $100 if it is over $100 at expiration. If it is, his gain or loss will be the premium received less the intrinsic value of the call. The intrinsic value is the in-the-money amount. 1) At $105, the intrinsic value is $5 so the loss is - $300 (+ $2 - $5) 2) At $101, the intrinsic value is $1 so the gain ...


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Web sites that offer free historical data are few and fleeting. The amount of data is usually limited unless you $ubscribe. They tend to disappear fairly quickly which I assume is because they can't get enough revenue from ads to survive (costs are high because of the amount of data is massive). You can $ubscribe to data vendors for data. They tend to be ...


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