Sell index call option. Definition. Buying an index call gives the owner the right, but not the obligation, to buy upon exercise the value of the underlying index at the stated exercise (strike) price before the option expires. However, any long index option may be sold in the marketplace on or before its last trading day if it has market value. All index.

Sell index call option

Options Trading: Understanding Option Prices

Sell index call option. Index options are defined by the following 4 characteristics: There is an underlying index; There is an expiration date of the option; There is a strike price of the option; The option is either the right to buy or the right to sell (call and put, respectively). The difference between calls and puts is the owner of an index call option.

Sell index call option


The index short call strategy is a bearish strategy designed to earn from the premiums for selling the index call options with the hope that they expire worthless. The options trader employing the index short call strategy expects the underlying index level to be below the call strike price on option expiration date.

As the index level could rise dramatically, there is virtually no limit to the loss sustainable should the index level rallies explosively. The underlier price at which break-even is achieved for the index short call position can be calculated using the following formula.

XYZ Index is a broad based index representative of the entire stock market and its value in June is However, for active traders, commissions can eat up a sizable portion of their profits in the long run.

If you trade options actively, it is wise to look for a low commissions broker. Traders who trade large number of contracts in each trade should check out OptionsHouse. Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable.

For instance, a sell off can occur even though the earnings report is good if investors had expected great results If you are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that it is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at a discount Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time Cash dividends issued by stocks have big impact on their option prices.

This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date 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 Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk.

A most common way to do that is to buy stocks on margin Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions.

They are known as "the greeks" Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account. You should not risk more than you afford to lose.

Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. Toggle navigation The Options Guide. Limited Unlimited Loss Potential: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds.

You should never invest money that you cannot afford to lose.


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