Options Trading Facts
As discussed earlier, options trading are the trading of rights. A call option is a contract which gives the holder the right, not obligation, to buy a stock or contract at a certain prize at a specific time. A put option is a contract which gives the holder the right to sell a share/contract at specific price at a specific time period.
Traditionally options quotes are done in per share but sold in lots of 100 shares. All options are coded according to its underlying security (name or the stock/contract), expiration date and type of option (call/put option). The option expiration date denote the month in which the right expires. All option rights expire on 3rd Friday of the option expiration month, unless the day is a holiday. If Friday is a holiday then the option will expire on Thursday.
The option premium is the price of an option which includes the intrinsic value of the option and its time value. The time value, also known as extrinsic value is the amount which buyers are ready to pay for that option. One major thing to affect the option value is the time remaining; as time expires the option value also declines.
Traditionally options quotes are done in per share but sold in lots of 100 shares. All options are coded according to its underlying security (name or the stock/contract), expiration date and type of option (call/put option). The option expiration date denote the month in which the right expires. All option rights expire on 3rd Friday of the option expiration month, unless the day is a holiday. If Friday is a holiday then the option will expire on Thursday.
The option premium is the price of an option which includes the intrinsic value of the option and its time value. The time value, also known as extrinsic value is the amount which buyers are ready to pay for that option. One major thing to affect the option value is the time remaining; as time expires the option value also declines.
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