THE OPTION CHAIN EXPLAINED
Options Chain Explained:
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Strike Price: Price at which the underlying security can be bought or sold
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When selling a put option - you agree to purchase shares at a specific strike price
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When buying a put option - you have the right to sell shares at a specific strike price
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When selling a call option - you agree to sell shares at a specific strike price
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When buying a call option - you have the right to buy shares at a specific price
Liquidity: The amount of buyers and sellers in the options market
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This is very important in order to readily buy and sell contracts with efficient pricing
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Tight bid/ask spread pricing enables efficient pricing in options
Delta: Proxy for probability of success at expiration (options delta)
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This is an absolute number (1.0 less delta) thus if delta is -0.20 then 1.0 - (-0.20) = 0.80
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0.80 = 80% chance the option expires worthless at expiration
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Alternatively, a 20% chance the option falls in-the-money at expiration
In-The-Money: Strike prices at which options can be exercised
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If a put is in-the-money then the option buyer can assign shares to the option seller
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If a call is in-the-money then the option buyer can buy shares from the option seller
Out-Of-The-Money: Strike prices at which options cannot be exercised
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The option buyer cannot assign shares nor can they buy shares from the option seller
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Stock Options Dad LLC
A Registered Investment Adviser (RIA) firm