How Options Work (Premiums, Strike Price, Expiry, Moneyness)
Every option has certain key components:
Premium: The price you pay to buy the option. This is determined by demand, supply, volatility, and time to expiry.
Strike Price: The fixed price at which the option holder can buy/sell the asset.
Expiry Date: Options are valid only for a certain period. In India, index options have weekly and monthly expiries, while stock options usually expire monthly.
Moneyness: This defines whether an option has intrinsic value.
In the Money (ITM): Already profitable if exercised.
At the Money (ATM): Strike price equals the current market price.
Out of the Money (OTM): Not profitable if exercised immediately.
Why Trade Options?
Options trading is popular because it serves multiple purposes:
Hedging: Protecting investments from adverse price movements. Example: A farmer uses commodity options to protect against falling crop prices.
Speculation: Traders can bet on market direction with limited capital.
Income Generation: Selling (writing) options like covered calls can generate steady income.
Leverage: With a small premium, traders can control large positions.
Every option has certain key components:
Premium: The price you pay to buy the option. This is determined by demand, supply, volatility, and time to expiry.
Strike Price: The fixed price at which the option holder can buy/sell the asset.
Expiry Date: Options are valid only for a certain period. In India, index options have weekly and monthly expiries, while stock options usually expire monthly.
Moneyness: This defines whether an option has intrinsic value.
In the Money (ITM): Already profitable if exercised.
At the Money (ATM): Strike price equals the current market price.
Out of the Money (OTM): Not profitable if exercised immediately.
Why Trade Options?
Options trading is popular because it serves multiple purposes:
Hedging: Protecting investments from adverse price movements. Example: A farmer uses commodity options to protect against falling crop prices.
Speculation: Traders can bet on market direction with limited capital.
Income Generation: Selling (writing) options like covered calls can generate steady income.
Leverage: With a small premium, traders can control large positions.
Hello Everyone! 👋
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Publicaciones relacionadas
Exención de responsabilidad
La información y las publicaciones que ofrecemos, no implican ni constituyen un asesoramiento financiero, ni de inversión, trading o cualquier otro tipo de consejo o recomendación emitida o respaldada por TradingView. Puede obtener información adicional en las Condiciones de uso.
Hello Everyone! 👋
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Publicaciones relacionadas
Exención de responsabilidad
La información y las publicaciones que ofrecemos, no implican ni constituyen un asesoramiento financiero, ni de inversión, trading o cualquier otro tipo de consejo o recomendación emitida o respaldada por TradingView. Puede obtener información adicional en las Condiciones de uso.