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When a trader obtains a call option, that trader has the right to purchase the underlying asset at the strike price on the expiration day. The buyer of a put option in turn has the right to sell an underlying asset at the strike price when the expiration day arrives. In both cases the buyer [...]

The advent of online trading has made a huge difference to the commissions being charged to execute a trade. Before the Internet, the only way for a trader to buy or sell trading assets was to ask a broker to execute the trade on his or her behalf. This usually happened over the phone. Understandably [...]

In the options world there exists two different exercise styles. These are called Americanoptions and European Options. The main difference between the two is that American optionscan be exercised before the expiration date, while European options can only be exercised atthe expiration date. This of course has important implications for the options trader, which wewill [...]

Introduction Options backspreads are trading strategies, which have the aim of benefiting from volatilemarkets. In this context a volatile market is where a sharp price increase or decreaseis expected. Typical examples of such a situation is just before publication of financialstatements, major news releases or court cases. Backspreads are able to profit whether the market [...]

Introduction At any given moment during its lifetime, an option is either In the Money (ITM), At the Money(ATM) or Out of the Money (OTM). An In the Money option is therefore only one of the 3options ‘moneyness’ states. A trader who understands how options are priced will find it easier to understand the conceptof [...]

In the world of international finance and trade, FX options and futures options are much more common than the stock options traded in by the majority of US retail traders. The FX (Forex) options market is in fact the biggest, deepest and most liquid options market in the world. Since the majority of this FX options trading takes place [...]

Introduction In order to understand Delta Neutral options trading, a trader should first be familiar with theOptions Greeks of Delta and Gamma and understand the interaction between these conceptsand volatility and time decay. Definition: A Delta Neutral options position is one that is neutral in terms of relatively smallmovements in the price of the underlying [...]

If one has to select the most basic of all options trading strategies, the covered call would certainly be one of the strongest contenders. With a covered call an owner of stocks tries to earn a regular income by writing call options against his or her share holdings. A covered call allows the investor to earn a monthly [...]