Optionsexpire on the third Friday of each month. People invest in options to gain theunderlying right, or they speculate on the value of the optionincreasing before the option expires. The value of the optiondepends on the price of the underlying stock, the time remainingbefore expiration, and market psychology. A put option is considered in the money if the strike price is higher than the current stock price.
That is, the terms of the put contract are enforced such that you must sell the underlying shares for the strike price. The sale of put options can be an excellent way to gain exposure to a stock on which you are bullish with the added benefit of potentially owning the stock at a future date at a price below the current fo price. To understand how selling puts may benefit your investment strategy, a quick primer on options may be helpful to some.TUTORIAL: Options BasicsCall Options Vs.
Put OptionsVery simply, an equity option is a derivative security that acquires its value from the underlying stock it covers. Owning a call option gives you the right to buy a stock at a predetermined price, known as the option exercise price. In the world of buying and selling stock options, choices are made grapb regards to which strategy is best when considering a trade.
If an investor is bullish, she can buy a call or sell a put, squsre if sell put option graph of square is bearish, she can buy a put or sell a call. Traders,Trading in Futures and OptionsOption GammaThe gamma of an option indicates how the delta of an option will change relative to a 1 point move in the underlying asset. So, by watching your gamma will let you know how large your delta (position risk) changes.The above graph pur Gamma vs Underlying price for 3 different strike prices.
You can see that Gamma increases as the option moves from being in-Short CallComponentsA short call is simply the sale of one call option. CharacteristicsWhen to use: When you are bearish on market direction and also bearish on market volatility.A short is also known as a Naked Call. Naked calls are considered very risky positions because your risk is unlimited.