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Options terminology

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Find out which stocks you should buy this month to make money in this bullish market. Get My Report Options Trading Terminology Call Option A call option gives the buyer the right to buy shares at a fixed price strike price before a specified date expiration date.

Options Trading Terminology - Hindi (2019)

Likewise, the seller writer of a call option is obligated to sell the stock at the strike price if the option is exercised. Put Option A put option gives the buyer the right to sell shares at a fixed price strike price before a specified date expiration date.

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Likewise, the seller writer of a put option is obligated to purchase the stock at the strike price if exercised. Strike or Exercise Price The strike price is the price per share at which the holder can purchase for call options or sell for put options the underlying stock. Exercise Exercise is the process by which an option buyer holder invokes the terms of the option contract.

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If exercising, calls will buy the underlying stock, while put owners will sell the underlying stock under the terms set by the option contract. All option contracts that are in-the-money i. Expiration Date The expiration date is the last day on which the option may be exercised.

It simply explains the intrinsic value i.

Monthly listed stock options cease trading on the third Friday of each month and expire the next day. Weekly options cease trading on Friday of best binary options strategies iq option week.

Options Trading Terminology

Hedging Hedging is a options terminology strategy used to reduce investment risk by implementing a transaction that offsets an existing position. Covered Call A covered call is a call option that is written sold against an existing stock position.

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Intrinsic Value The intrinsic value of an option is the amount of profit that can be theoretically obtained if the option is exercised at that moment and the stock options terminology purchased for calls or sold for puts at the current market price. If an option is out-of-the-money i. Premium The price of an option is called its premium.

Key Options Terms

Time Decay Because options have an expiration date, all options are wasting assets whose time options terminology erodes to zero by expiration. This erosion is known as time decay. Time value varies with the square root of time, so that as an option approaches its expiration date, the rate of time decay increases.

Short To be short an option means to have sold the option in an opening transaction.

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A short position is carried as a negative on a statement and must be purchased later to close out. Let us know in the comments below.

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  4. Every option contract has a breakeven associated with the option type.

He uses calls, puts and covered calls to guide investors to quick profits while always controlling risk. Post navigation.