Also known as volume traded. High volatility increases the cost of an option, as does the amount of time until expiry.
If the underlying stock loses value prior to expiration, the option holder makes money. In this case, if the stock goes up instead, the cost of the option is the most the option buyer can lose. The strike price is the predetermined price at which the underlying stock can be bought or sold. Time value and volatility also play a significant role in the price of an option.
High volatility increases the cost of an option, as does the amount of time until expiry. Since more volatility and more time mean an increased chance the price could move through the strike price, this will make the options more expensive than options with lower volatility and less time till expiration. While some trader buy options, other need to write them.
The writer is on the opposite side of the trade as the buyer. The writer receives the premium for writing the option. This is their maximum profit.
This could mean large losses. For example, if a trader writes a call option the option buyer has the right to buy at the strike price. Writers can protect themselves by writing covered calls. This is a common strategy.
An investor already owns shares of a company. Instead of selling the stock directly, they write call options for a strike prices above the current stock price. If the stock does rise above the strike price they simply sell the call buyer their own shares.
Option writers can also use puts to accumulate a stock position they want. Employee stock options are similar to call or put options, with a few key differences. Employee stock options normally vest rather than having a specified time to maturity. There is also a grant price that takes the place of a strike price, which represents the current market value at the time the employee receives the options. A contract that grants the holder the right, but not the obligation, Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums.
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Go Now Clear List. Calls "Calls" is an option that gives the holder the right to buy the underlying asset. Last "Last Sale" is the most recent trade. Chg "Change" is the difference between a day's last trade and the previous day's last trade. Bid "Bid" is the price a potential buyer is willing to pay for a security. Sometimes also used in the contect of takeovers where one corporation is bidding for trying to buy another corporation.
In trading, we have the bid-ask spread which is the difference between what buyers are willing to pay and what sellers are asking for in terms of price. Ask "Ask" is the quoted ask, or the lowest price an investor will accept to sell a stock.