1 Option: Daily Stock Option Trading Blog and Option Education


Based on your answers, the broker assigns you an initial trading level (typically 1 to 4, though a fifth level is becoming more common) that is your key to placing certain types of options trades.

Accelerated Time Decay refers to options that have less than a month to maturity decay at an

Stock Option Trading Education

Option trading can be speculative in nature and carry substantial risk of loss. Only invest with risk capital. Options belong to the larger group of securities known as derivatives.

Stock Option Parity means that the stock option is trading at its intrinsic value. Accelerated Time Decay refers to options that have less than a month to maturity decay at an An Option Theta measures the rate of decline in a stock option due to the passage of time.

Option traders often construct synthetic put positions to hedge their short stock positions. A call option gives the buyer the right, but not the obligation, to buy the underlying stock or Index options include baskets of stocks that are combined from group or sector indices.

Multi-Listed Stock Options are stock that have options that are listed on more than one exchange An option bid is the price an option buyer is willing to pay for the option.

If the stock option Screening should go both ways. The broker you choose to trade options with is your most important investing partner. Finding the broker that offers the tools, research, guidance and support you need is especially important for investors who are new to options trading. For more information on the best options brokers, read our detailed roundup to compares costs, minimums and other features. Or answer a few questions and get a recommendation of which ones are best for you.

In order to place the trade, you must make three strategic choices:. This determines what type of options contract you take on. A call option is a contract that gives you the right, but not the obligation, to buy a stock at a predetermined price called the strike price within a certain time period. A put option gives you the right, but not the obligation, to sell shares at a stated price before the contract expires. If the stock does indeed rise above the strike price, your option is in the money.

If the stock drops below the strike price, your option is in the money. Option quotes, technically called option chains, contain a range of available strike prices. The price you pay for an option has two components: The price you pay for an option, called the premium, has two components: Intrinsic value is the difference between the strike price and the share price, if the stock price is above the strike.

Time value is whatever is left, and factors in how volatile the stock is, the time to expiration and interest rates, among other elements. Every options contract has an expiration date that indicates the last day you can exercise the option. Your choices are limited to the ones offered when you call up an option chain. Expiration dates can range from days to months to years. Daily and weekly options tend to be the riskiest and are reserved for seasoned option traders.

For long-term investors, monthly and yearly expiration dates are preferable. Longer expirations give the stock more time to move and time for your investment thesis to play out. A longer expiration is also useful because the option can retain time value, even if the stock trades below the strike price.

If a trade has gone against them, they can usually still sell any time value remaining on the option — and this is more likely if the option contract is longer. Options trading can be complicated. Additional range and volume criteria weed out the "flat-liners". The results will often include some key reversals - a very powerful price formation. The opposite is true for gap down.

This move represents a large order imbalance and the trades are completely out of the prior day's range. I have found these movements to be significant and often tradable. Option Trading Starts With Searches Your option trading needs to start here one hour before the "open". LEAP stock options have more than six months until expiration.

They can have a lifespan of up to An option delta measures the change in the price of a stock option relative to the change in the An Option Theta measures the rate of decline in a stock option due to the passage of time. The strike price exercise price is the level at which the buyer of a call option can exercise An option contract gives the buyer of the option the right, but not the obligation to buy call