Positron Investments

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Options basics

  • What is a call option
  • What is a put option
  • Option expiration
  • Option strike price
  • Option premium
  • Moneyness
  • Option buyer vs option writer
  • Options positions
  • American & European style options
  • Intrinsic value & time value
  • Volume & open interest
  • Options chain
  • Payoff & profit diagrams
  • How to interpret a payoff-profit diagram
  • Historical volatility
  • Options pricing
  • Implied volatility
  • Sensitivity factors (Greek letters)
  • Greek letters: Delta
  • Greek letters: Theta
  • Greek letters: Vega
  • Greek letters: Rho
  • Greek letters: Gamma
  • Position Greeks
  • Put-call parity
  • Trading options

Option strike price

The strike price of an option is the price that it can be exercised. It is fixed for the lifespan of the option.

Call option example

Suppose you are long a call option in ORCL stock. You have the right to exercise it at its strike price, i.e. $30. This means that you have the right to buy 100 shares of ORCL at the predefined price of $30. If the stock is at $40 then you want to exercise it and buy the stock at $30 in order to sell it at the market price of $40 for a gross profit of $10.

Put option example

Suppose you are long a put option in MSFT stock. You have the right to exercise it at its strike price, i.e. $35. This means that you have the right to sell 100 shares of ORCL at the predefined price of $35. If the stock is at $25 then you can buy 100 shares at the market price of $25 and exercise your right to sell it at $35 for a gross profit of $10.

Links

  • Bloomberg.com
  • Capital.gr
  • chartmill.com
  • Finviz.com
  • Forexfactory.com
  • Freestockcharts.com
  • Yahoo Finance

Recent posts

  • Possible breakdown in Greek stock exchange
  • Application of a simple strategy in EUR/USD
  • S&P 500 runs out of fuel
  • Short term downtrend in Greek stock exchange
  • Possible upward movement in S&P 500

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