Definitions Buy call option – a stock option is the right to buy a stock (but not the obligation) at a certain price for a limited period of time. The price at which the stock may be bought is called the striking price. Three terms describe the relationship between the stock price and the options striking price: At the money / In the money / Out of the...
Future and option trading are popular investment strategies in the world of finance. Both involve making investments in financial instruments with the expectation of making a profit. While the two types of trading have their similarities, they are also quite different in terms of their structure and the risks involved. Before you start trading in the Future and...
Welcome to a world of visual options trading. Stop trading options blindly. In this tutorial I am going to explain the following using the "call option buy or sell indicator": 1. What each line means to your option P&L. Blue line = 3 points of profit. Light Green line = 2 points of profit. Dark Green line = 1 point of profit. Yellow line = ...
Options have been and are an important instrument on the financial market for a trader trading Intraday Futures. Therefore, while exploring the mechanics of the option market over the last several months, as a result of work, indicators were created that load data from Quandl and then look for patterns that may herald a change of direction on the derivative market...
What is the put/call ratio? The put/call ratio (PCE) is a popular barometer of market sentiment, which shows the ratio of trading volumes of Put vs Call options. However, with distortions in the current price of nearly every instrument off the back of "free money," and persistent market intervention by policy makers, we're not quite seeing the price discovery...
The ratio call spread for debit is the same strategy as ratio call spread credit. But now, the upper and lower strike price are farther apart. This change, give different mathematical results as you can see on the chart. If you didn’t read the previous post, please do. In the chart we see a ratio spread of 2:1, in this case, the options that were sold are now...
A ratio call spread is a neutral strategy in which we buy several calls at a lower strike and sells more calls at a higher strike. In a ratio call spread with credit, there is no downside risk. The ratio spread that we see on the chart has a ratio of 2:1. We can see from the chart the non-linear behavior of options. Inputs: MA (Mastercard) Credit received -> 3.1...
A lot of traders don’t understand why when they entering a spread they don’t receive most of the money even if the stock price is going their way immediately, in this post we will see why. A spread is a position in which we buy one option and sell another option on the same stock. All the options are Calls, with put spreads all the options are puts. There are...
I decided that before explaining complex strategies, I need to explain call options and put options and differences between buying and selling. (I'm adding down calls chart) The term "the option is worthless" meaning that the stock price didn’t finish above the strike price in calls or finish below in-puts. Buy Calls – Bullish “strategy”, you need to select a...
Hello traders, In my previous post, I wrote about, At the money / In the money / Out of the money call option, basic definitions, and the 6 factors that determine the option pricing. I remind you that options pricing is based on the partial differential equation from the Black–Scholes model, the solutions to this equation are not linear, which means it is hard to...