Option Premium Definition
When trading options on the stock market, stocks with high volatility (ones whose share prices fluctuate a lot) are more expensive than those with low volatility (although due to the erratic nature of the stock market, even low volatility stocks can become high volatility ones eventually). xA5
Options Premium Explained | The Options & Futures Guide
Options typically expire on Fridays with different time frames (for example, monthly, bi-monthly, quarterly, etc.). Many options contracts are six months. xA5 xA5
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There are numerous strategies you can employ when options trading - all of which vary on risk, reward and other factors. And while there are dozens of strategies (most of them fairly complicated), here are a few main strategies that have been recommended for beginners. xA5
And while there are plenty of other options faux pas, be sure to do your research before getting into the options trading game.
If you were buying a long put option for Microsoft, you would be betting that the price of Microsoft shares would decrease up until your contract expires, so that, if you chose to exercise your right to sell those shares, you&apos d be selling them at a higher price than their market value. xA5
For both call and put options, the more time left on the contract, the higher the premiums are going to be. xA5
Unlike other securities like futures contracts, options trading is typically a long - meaning you are buying the option with the hopes of the price going up (in which case you would buy a call option). However, even if you buy a put option (right to sell the security), you are still buying a long option. xA5
Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date.. [Read on.]