Basic Definition of an Option The definition of an option sounds complicated, particularly if this is the first time you’re encountering it, so don’t be too concerned if it isn’t making complete sense right away. This course will help you understand the basics of options. With that said, here [...]
How We Calculate and Report Our Track Record. This article outlines the way in which we calculate and report the performance of the EWO trade alert track record. It is also intended to help you understand the purpose of our trade alert service and how best to interpret the [...]
Option Components Options have five main standardised terms by which they are defined: Type of option (call or put) Underlying security (specific stock or index) Exercise (or strike) price Expiry date Option premium These five variables distinguish each individual option from every other available option. Each time you enter [...]
Buying a put option is a welcomed alternative to short selling a stock. Although both strategies offer traders the chance to make a profit from a decrease in a market, only buying a put does so with limited risk. A put option gives the buyer the right, but not [...]
Call options are an attractive alternative to buying the stock. The list below provides an inventory of a call’s properties. Call options give the buyer the right, but not the obligation to buy an underlying stock at the call’s strike price. In the US, each stock option typically represents [...]
Types of Options In this section we’ll give you some more context to the way that options markets work and who are the main participants involved. There are two main types of options: Over the Counter (OTC) options and Exchange Traded Options (ETO). OTCs are privately traded between the [...]
In the beginning, options trading will most likely be a little confusing. These sections are valuable and should be reviewed until the concepts are clear. As you read ahead, refer back to these sections for clarity and it will all come together. Basic Mechanics of Going Long and Short [...]
The Internet has made the process of reviewing option prices extremely easy. There are dozens of sites that provide quote services. Some of these services provide real- time quotes, but most are delayed by at least 20 minutes. If you want to receive streaming real-time data, you must be [...]
An option pricing model is a mathematical formula used to determine the theoretical fair-value of an option. By inserting the components just covered into a pricing model, a trader can determine what an option should be theoretically worth. Keep in mind that the price at which an option trades [...]
Volatility is one of the most important variables in options trading. It significantly impacts an option’s premium and contributes heavily to an option’s extrinsic value. Volatility can be defined as a measurement of the amount an underlying instrument is expected to fluctuate in a given period of time. In [...]
