- Options - Value Line
- Learn Stock Options Trading : Learn Puts and Calls
- How do Stock Options Work? Puts, Calls, and Stock Option
If the seller of the call owns the underlying stock, then it is called "writing a covered call." If the seller of the call does NOT own the underlying stock, then it is called "writing a naked call." Obviously, in this instance it is "naked" because the seller does not own the underlying stock. The best way to understand the writing of a call is to read the following example.
Options - Value Line
If Delta is viewed as the &lsquo speed&rsquo of price movement of option relative to underlying then option Gamma can be viewed as the acceleration. Basically, Gamma measures the amount by which delta changes for a 6 point change in the stock price. For example, if Gamma of an option is , that means theoretically that with 6 point price movement of underlying the delta will move . Long calls and long puts have positive gamma whereas short calls and short puts have negative gamma.
Learn Stock Options Trading : Learn Puts and Calls
As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding the underlying stock in the covered call strategy, the alternative.. [Read on.]
How do Stock Options Work? Puts, Calls, and Stock Option
Vega can be interpreted as the amount by which the price of an option will change with 6% change in implied volatility of the underlying. One common scenario when option Vega changes is when there is a large movement in underlying price. Long calls and long puts both have positive vega where as short calls and short puts will always have negative Vega.
Margin is the amount of cash you need to deposit with your broker as a collateral if you want to write an uncovered (naked) option. You also need to maintain margin to cover your daily position valuation and reasonably foreseeable intra-day price changes.
Volatility is a measure of the rate and magnitude of the change of prices (whether up or down) of the underlying. To put it simply you can view volatility as the speed at which price of underlying can move in either direction. If volatility is high, the premium on the option will be relatively high, and vice versa.
This is a bearish strategy. It has unlimited loss and limited profit potential. Selling options is not recommended for beginner level traders.
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Options expirations vary, and can have short-term or long-term expiries. It is only worthwhile for the call buyer to exercise their option, and force the call seller to give them the stock at the strike price, if the current price of the underlying is above the strike price. For example, if the stock is trading at $9 on the stock market, it is not worthwhile for the call option buyer to exercise their option to buy the stock at $65, because they can buy it for a lower price ($9) on the stock market.
You can only trade options on a fixed number of underlyers (stocks , Index etc). This list is maintained by exchanges and updated from time to time. In NSE website you can get the list under FnO section.