3.
Call and Put Summary
Summary of Put and Call Relationships
Calls Puts
Stock Price>Strike Price In-the-money Stock Price<Strike Price
Stock Price=Strike Price
At-the-money Stock Price=Strike Price
Stock Price<Strike Price Out-of-the money Stock Price>Strike Price
Call Up (Stock Price-Call Price) Intrinsic Value Put Down (Strike Price-Stock Price)
Strike Price + Premium Breakeven Strike Price-Premium

4.
Premium Inputs

  1. Volatility - the greater the volatility or stock price movement, the more valuable is the option and the greater the premium.
  2. Intrinsic Value Amount - the more an option is in the money, the greater its intrinsic value. An at-the-money or out-of-the-money option has an intrinsic value of zero.
  3. Time Remaining Until Expiration - the more time to expiration the greater the option's value and vica versa.
  4. Interest Rates.

5. Option Strategies


Outlook
Bullish Buy Calls - speculate on the stock\'s direction, lock in a price for little outlay, diversify holdings, protect a short position. Write Puts - speculate on the stock\'s direction, increase returns from selling options, purchase price of stock reduced by premium received.
Bearish Buy Puts - speculate on the possible downward direction of the stock\'s price, defer a decision, protect a long stock position. Write Calls - speculate on stock\'s direction, increase returns from premium income received, lock in a sales price, protect a long stock position.




Options: Advantages and Disadvantages

Related Articles
  1. Trading

    What Is Option Moneyness?

    Get the basics under your cap before you get into the game.
  2. Trading

    Getting A Handle On The Options Premium

    The price of an option, otherwise known as the premium, has two basic components: the intrinsic value and the time value. Understanding these factors better can help the trader discern which ...
  3. Trading

    The Options Premium

    An options premium is the amount of money that investors pay for a call or put option. The two components that affect options pricing are the intrinsic value and time value. Matthew is interested ...
  4. Trading

    Strategies for Trading Volatility With Options (NFLX)

    These five strategies are used by traders to capitalize on stocks or securities that exhibit high volatility.
  5. Investing

    Writing Covered Calls On Dividend Stocks

    Writing covered calls on stocks that pay above-average dividends is a strategy that can be used to boost returns on a portfolio, but it carries some risk.
  6. Trading

    The Basics Of Option Price

    Options can be an excellent addition to a portfolio. Find out how to get started.
  7. Retirement

    Write Covered Calls To Increase Your IRA Income

    Covered calls may require more attention than bonds or mutual funds, but the payoffs can be worth the trouble.
  8. Trading

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  9. Trading

    Trading Volatility? Don’t Trade Stocks, Trade Options

    During times of volatility, traders can benefit greatly from trading options rather than stocks. We explain why.
Frequently Asked Questions
  1. What is the difference between yield and return?

    While both terms are often used to describe the performance of an investment, yield and return are not one and the same ...
  2. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  3. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  4. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
Trading Center