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Usually you would just sell the option in the market. Exercising it means losing time value.

Of course the settlement differs from the equity options!

- Most would say go with Thinkorswim or Interactive Brokers. - Go to the "books" section of this site. The books have also been mentioned numerous times - McMillan, Natenberg, Cottle... - Yes! - www.theocc.com, www.888options.com, www.cboe.com

He writes: "Suppose...". It's an example. He jsut made up that number. Volatility is measured by standard deviation on an annual basis. Standard deviation is a statistical measure, which measures the distribution of returns around the mean.

There's no direct relationship between the ATR and the implied volatility!

I presume you mean that the sold call is worth 0 not that it's P/L is 0. In that case, you can buy back the short and leave the long open.

I doubt you'd be able to find many brokers that offer access to such a wide range of markets.

Yes, but the example trade was in stock options, which don't trade afterhours.

Yes, a deep ITM call option will have a delta close to 1 (-1 for puts), however these don't have much leverage and are usually a lot less liquid. I don't think you should try to replicate your spot payout with options. Options are a completely different animal and it is not as simple applying...

Unless you plan on selling ITM calls on stocks going ex-dividend you should be OK with American style options. Also, I would consider trading options on SPY, QQQQ, IWM - penny spreads and great liquidity. They are american style though, but that's not a issue in most cases.

No, that's the mistake most people make. Options provide leverage and you can lose the whole premium paid, so you shouldn't just blindly double up. Also, yes, the payoff at expiry is as simple as that.

Options don't trade afterhours.

You are assuming you hold the option to expiry. If you don't then the p/l is not that straight-forward as you have to take into account the option's delta (and gamma for more accuracy), changes in IV and days to expiry. An ATM option will move by about half of the spot move.

Ok, but what's your risk/reward now? My guess is, not very good. So, are you telling me you couldn't find a trade with a better risk/reward than the roll!?

What sort of answer do you expect? You are asking a very general question. You should try asking more specific ones as noone's gonna give you an Options 101 lecture. Otherwise, it's like asking, I wanna fly an Airbus 380 for Singapore Airlines, any suggestions!?

He(she) sold the option for $50 and lost $800 on an adverse move. Since it was an overnight trade the stock most likely gapped on open hence it was impossible to close an option at anything but that price.

This begs the question why adjust then? Just close out and move on!

Don't trade!:D :D :D

1. The further OTM the option the greater the leverage and the further ITM the option the lesser the leverage. So as an option moves from OTM to ITM it loses leverage. Buying near ATM gives the greatest Gamma (i.e. acceleration). 2. It doesn't get much simpler than buying an option. Anything...

Exactly, if it is a special dividend then the contracts are adjusted.