5 Key Factors That Affect Stock Options And Their Value

Stock options offer a wonderful way for you to play the market with little risk but high potential for profit.  Rather than buying the actual stock and taking the risk of it tanking, you simply buy the option to buy or sell it.  This gives you a fixed price that won’t change no matter what the underlying price does.

Understanding stock options is quite challenging.  Many mathematical models have been constructed and applied to the study of how options operate.  However, you can get a good grasp on how they … Read More

Exercising A Call Option – When Is The Best Time?

A call option gives the investor the right to buy stock, but not the obligation. It’s a contract that agrees to let you buy at a set price (called the strike price) for a certain limited time until its expiration date.

For the investor who holds a call option, hopefully the underlying value of the stock will go up. If the asset value rises above the strike price, you can exercise the option and buy stock at the original (strike) price. This means that you’re getting the stock well below … Read More

When Is The Best Time To Exercise A Put Option?

A put option is a contract that allows the holder to sell a stock at a set price at or before a set period of time. The holder of the option has the right but not obligation. In other words, they can choose not to exercise the option with no penalties. When you buy a put option, you pay a premium to a ‘writer’ who keeps it regardless of what happens in the underlying stock.

How You Profit From Put Options

Put options offer something unique in the world of … Read More

What Is Put Call Parity And How Can It Help You?

Put call parity is an important concept in the world of options trading. It’s a mathematically simple concept that helps us to determine the value of options relative to other factors in the equation and make sound trading decisions.

Put Call Parity Defined

The textbook definition of put call parity is that it’s a partial differential of option price with respect to stock price. In laymen’s terms, this means that you have a situation where put and call price are tied together. When one moves, the other one moves … Read More

The VIX Index And How It’s Used

The VIX Index is a tool used by investors to try to predict how the broader equity market will move in the near future.  VIX is the ticker symbol of the CBOE (Chicago Board Options Exchange) Volatility Index.  It shows investors the expected volatility of the market over the next 30 days.  It is often referred to as the ‘investor fear gauge’ or ‘investor fear index.’

The VIX Index is created by considering the volatilities of out-of-the-money S&P index options.  It’s calculated from both calls and puts.  Although it shows the expected market … Read More