European Style Option

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When the price of the underlying stock is equal to the strike price of the option, the contract is At The Money. In the image below you can see that the current price of APPL is 139 and the red rectangles are highlighting the fact that the JUL 15th 139.00 Calls & Puts are currently…

The Intrinsic Value is basically the value of an in-the-money option minus its time value. Intrinsic value is the current real tangible value of the options contract. The intrinsic value of a call option is calculated by subtracting the strike price of the Option from the underlying stock. For a put, intrinsic value is the…

If you sell a certain type of option and you already have or get the thing you’re supposed to sell through that option, you’re called a covered call writer. EXAMPLE: An individual owns 100 shares of XYZ common stock. If she writes one physical delivery XYZ call option—giving the call holder the right to purchase…

This is a spread strategy that involves selling options and buying a greater number of out-of-the-money options. Backspreads are often in a ratio of 1 to-2 or 2-to-3 and most traders use them because they work well when there is an increase in market volatility especially when they think the market is about to move…

There are some options settle for cash rather than shares. Indexes like the S&P 500 Index (.SPX) and the S&P 100 Index (.OEX) are examples of cash settled options.