An option can be described by its strike price’s proximity to the stock’s price. An option can either be in-the-money (ITM), out-of-the-money (OTM), or at-the-money (ATM).
An at-the-money option is described as an option whose exercise or strike price is approximately equal to the present price of the underlying stock.
For instance, if Microsoft (MSFT) was trading [...]
When vertical spreads are mentioned, they quite often come with monikers such as ‘bull’ and ‘bear’. This lends most to think of vertical spreads as directional plays which is true. However, vertical spreads can be used to take advantage of two other potential trading opportunities – time decay and volatility movement.
If you are looking for [...]
Since the Strangles’ profit potential is dependent on its price from purchase time to expiration, the investor should be aware of the several factors that affect the Strangles’ price.
Stock Price
The first is, of course, stock price. The stock’s price will dictate the value of both components of the Strangle – the call and put thus [...]
The Strangle is another option strategy that features the use of options in unison with each other. The Strangle is philosophically identical to its ‘cousin’ the Straddle. However, whereas the Straddle has a single strike as its focal point, the Strangle has its focal point spread out over two strikes.
The effect of this as compared [...]
An at-the-money option has both advantages and disadvantages over stock and in-the-money options. First, the at-the-money option will be cheaper then both the stock and the in-the-money option. So there is less capital requirement and less total risk.
Remember, when buying an option, you can only lose what you spend. The problem is the amount of [...]
What is the difference? Some may shout. There is indeed a very BIG difference. I used to search for options strategies all the time as I thought it will make me a better trader. But does it really help a trader to trade better? My answer is Yes (30%) and No (70%). Most “options strategies” [...]