New answers tagged

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When you buy a call option, you need no money to exercise it at maturity. If it is in the money, you will gain S_T-Strike where S_T is the price at maturity. If it is out the money, the option is worthless and there is no need to exercise it. But, if you are selling a call option, you should be sure to have S_T-Strike at maturity to pay the payoff to your ...


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If your call is OTM at expiration, it will be worthless and it will expire. If your call is ITM at expiration, it will have some intrinsic value. If an option is one cent or more in-the-money (ITM) at expiration, the Option Clearing Corp (OCC) will automatically exercise options whether they are long or short. This is called Exercise by Exception. For ...


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There are 3 expiration cycles for stocks: JAJO: January, April, July, October FMAN: February, May, August, November MJSD: March, June, September, December All optionable stocks will offer options in the current month, the following month and at least the next two months in the cycle. Of the 3,000 optionable stocks, nearly 500 offer weekly options for ...


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The owner of your short call has the right to buy this stock at $84. If the stock has dropped to $75, it would make no sense for him to do so since he can buy it for $9 less on the open market. The call will expire worthless and you will continue to own the stock but at a loss of $3.50 due to the $5 drop from $80 to $75 less the $1.50 premium received. ...


0

Let's say the commodity you are talking about is gold, I know it's possible to work out the correlation coefficient of stocks with the price of gold as I have done it before on the entire stock market. That's when I found out that gold producers have the highest degree of negative correlation with the main indices. I wasn't actually even looking ...


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There are two parts to the answer. For the first part, let's assume that there's no earnings announcement on the near term horizon. You can calculate the future value of any call that you buy using an option pricing model. That can be time consuming. A quick way to guesstimate the return is to look at the current option chain. Your premise is a short ...


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Doubt #1: Price of straddle vs. 85% straddle price. Implied volatility tends to trade over realized volatility. That is almost assuredly why you've read to make such an adjustment (the ~85% figure is a very ballpark number and would vary on a case-by-case basis). Look at a data vendor that such as ivolatility.com graphs to get a sense of how much and how ...


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Each option has its own implied volatility. There are a number of option pricing models so I would assume that it's possible that there may be mild variance in the calculation via each one. I've used Black Scholes for about 30 years so I don't know to what degree it varies from model to model. There are also a number of ways to calculate the average ...


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Regarding equity options, nearer term expirations tend to have more liquidity and daily trading volume than further expirations as do options closer to the current price of the underlying. FWIW, I don't think that there's anything to be achieved from ranking or analyzing a scatter plot of option trading by strike or expiration. Options are derivatives that ...


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An alternative way to short a security is to create a Synthetic Short using its options, if they exist. This strategy utilizes two option positions. A short call is sold and the proceeds are used to buy a long put, both with the same strike and expiration. This combination has a similar risk and reward to shorting the underlying with the difference being ...


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There a lot of confused information in your question so it's impossible for anyone to provide an accurate answer. When there's a stock split (traditional or reverse), the options adjust accordingly. If the put was OTM before the split, it's OTM after the split. No one exercises OTM options nor would a broker allow you to do so. If there's time ...


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1) Did the option value actually increase to $3.10 before close on 2/13 or do you think this was a bug in Robinhood's software? No, this was not a bug. And no, your option's value did not actually increase to $3.10. The bid/ask widened from $1.80x$2.00 at 15:54:42 to $1.70x$4.50 at 15:55:06. The latter quote is what is found in your screen capture. ...


2

I suspect that these quotes were captured after the market closed when B/A spreads widen, some moderately, some drastically. If so, that would explain why they don't line up. The quotes are stale. During regular hours, OTM options may also not align if there's no interest (open orders) in some of them. In such cases, the market maker sets a wide B/A ...


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The SPY Mar 20 $425 call had a closing bid/ask Friday of $0.00 x $0.01. With a bid of zero, there's nothing to be gained from creating a vertical spread, nor can you do it if that's an accurate quote. And if the bid was one cent, it's insufficient reward for limiting the upside. Whether it's the vertical you proposed or just long the $359 calls, you can ...


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Open interest information tells us how many contracts are open and live in the market. Volume on the other hand tells us how many trades were executed on the given day. For every 1 buy and 1 sell, volume adds up to 1. The volume counter starts from zero at the start of the day and increments as and when new trades occur. Hence the volume data always ...


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Open Interest (not Option Interest) represents the number of contracts that exist on any given day. In order for a trade to occur, there must be a buyer and a seller. Each party may be opening or closing the contract. There are 4 scenarios: Buy to Open (BTO) and Sell To Open (STO) Both parties are initiating a new position (one new buyer and one new ...


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If this is a $215/$217.5 vertical spread for a credit of $251 then you have indeed found a risk free position and you will make $1, assuming that you do not pay commissions or assignment/exercise fees. The downside to this trade is if MCD expires between the strikes. If you do nothing at expiration, you will be put the stock at $217.50 (buy it) and your $...


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Your link doesn't provide specific information about the components of your Iron Condor so I don't know what the details of your position are. Every option position has an immediate loss once established because of the bid/ask spread loss. My guess is that is what you are observing. If you want something more than a guess, edit your question and include ...


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This is mostly speculation, but since nobody else has answered, I'll go ahead: It's more difficult to explain to many employees (who aren't all the kind of people who visit PF&M SE) what options even are, how to value them, and how to exercise them. So participation would probably be lower for an option-based ESPP.


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With an equity trade, transfer of title occurs between the parties of the trade. Settlement involves not only the transfer of shares between counter parties but ownership is also recorded on the share register via a transfer agent. An option trade involves a contract created between a buyer and a seller. There is no transfer of title via a transfer agent, ...


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Both NQO and ISO are stock options offered for employees and directors as extra incentives and compensation for the work on that specific company. The non-qualified means that they are not restricted by waiting periods, profit, price, employee status or any other stipulation. When employees sell shares after they vest, they have the potential to receive ...


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Think about having a positive view of a stock. You think it's undervalued but you're too smart to think that once you've opened up a position the market is suddenly going to understand where it was going wrong and start to price the stock correctly, causing the stock to go up and you to make money. Ideally, what you'd like to do when the stock starts going ...


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You question lacks an understanding of how option market makers make a market. They are not a counter party just sitting on the other side of you trade with the result that one of you wins and the other loses and in your example, to the tune of $4 million. In addition, you are proposing that market makers are manipulating the market to screw you when you ...


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Try further multiplying your calculation by the delta of the option. This will provide an effective leveraged position value in the underlying. That is, your dollar exposure to incremental moves in the underlying is as if you had a $70k plain long position.


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