- Forex Trading - FXCM
- Putting Options to Work - Charles Schwab Corporation
- What is expiration date? definition and meaning
Benefits Vs. Drawbacks
When it comes to pricing options, traditional options can be priced using the Black-Scholes option pricing formula. Exotic options can't be priced as easily, at least not with a measure as widely accepted as the Black-Scholes. This can serve as a benefit as well as a drawback, as the inherent mispricing of exotic options may either work for or against the investor.
Forex Trading - FXCM
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Putting Options to Work - Charles Schwab Corporation
This Guide to Options Trading Basics provides everything you need to quickly learn the basics of options and get ready for trading. So let&rsquo s get started.
What is expiration date? definition and meaning
In general, the longer a stock has to expiration, the more time it has to reach its strike price, the price at which the option becomes valuable. In fact, time decay is represented by the word theta in option pricing theory. Theta is one of four Greek words used to reference the value drivers on derivatives. The other three 'Greeks' are delta, gamma and vega. All other things equal, the more time an option has until expiration, the more valuable it is.
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In the first part of this series, Getting Started With Options , we discussed the basics of trading options such as terminology, rights and obligations, open interest, pricing, sentiment and expiration cycles. Now it's time to put some of this new knowledge about how to trade options to work by examining some basic options trading strategies and how they can be used.
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With stocks, you are limited to buying, selling and selling short. Options allow more possibilities, including strategies: