Stock market options for dummies
Time Decay An important factor to consider is the decay of time. Which means the stock market options for dummies selling you the contract is actually giving you that right. Buying and Selling Options All this discussion was assuming the fact that you would keep the option contract until expiration. A Call Option is said to have intrinsic value if the current market price is above the strike price. Remember that an option contract has an expiration date.
That's called an Option Assignment. Remember we talked about Intrinsic Value? Remember that an option contract has an expiration date. In reality many people do not buy and hold the option that long.
These two concepts are called Intrinsic Value and Time Value. Designed by The entire content of this website is meant for educational purposes only. In both scenarios you are buying low and selling high!
For a Put Option, obviously the Intrinsic Value would be based on how much lower the market price is relative to the stock market options for dummies price. The final thing to note is the area highlighted in yellow. A couple of things to point out is the pricing standard and the highted area. An option contract can be one of two types:
The yellow highlighted options are referred to as "In the money" options. You can see it is almost self explanatory. Remember we talked about Intrinsic Value?
People often tout the upside to options investing while playing down the risks involved. An option contract will always have what's called a Strike Price. They get it wrong just as often as they get it right.
One option contract is good for shares of that underlying stock. The rest of the option price is the Time Value. But the fact is you may not want to.
The rest of the option price is the Time Value. It is divided by and then listed. An option will expire at the close of the third Friday of the stated expiration month.