All About Options

Yesterday, when AAPL was selling for $186.78, the contract with a strike price of 185.00 was going for $2.83 and the one with a strike price of 187.50 was available for $1.54.

Today, with AAPL at $189.10, the contract with a strike price of 185.00 is going for $4.58 and the one with a strike price of 187.50 for $2.53.

Screenshot_3.png


So then, I probably DON'T want to wait until Friday to cash in on an in-the-money weekly option given that, from what I understand, as options approach expiration, liquidity can decrease (especially for out-of-the-money options), with the lower liquidity possibly making it more difficult to find a buyer or seller at desired prices; not to mention the chance of there being increased volatility leading to wider bid-ask spreads and increased risk.


ChatGBP, if I don't sell an in-the-money weekly option contract before expiry, do I forfeit my profit?

If you hold an in-the-money (ITM) weekly option contract until its expiration, and it is not exercised, you won't necessarily forfeit your profit. However, there are a few important points to consider, one being that options which are in-the-money by a certain amount at expiration are automatically exercised by the clearinghouse. If you hold a call option and it's in-the-money, you may find that the corresponding shares are automatically purchased in your account. If you hold a put option, you may find that the shares are automatically sold.


Bing.com, if I don't sell an in-the-money weekly option contract before expiry, do I forfeit my profit?

In this scenario, the trader who holds the contract does not forfeit their profit; instead, they can choose from the following options:
  1. Exercise the Option: The trader can choose to exercise the option, which allows them to buy or sell the underlying asset at the agreed-upon strike price. This action can be profitable if the market price of the asset is favorable.

  2. Sell the Option: Alternatively, the trader can sell the option before it expires. By doing so, they can capture the time value of the option, which may result in a more profitable outcome.

  3. Let It Expire: If the trader takes no action, the option will expire automatically. In this case, the trader will realize their profit based on the difference between the strike price and the market price of the underlying security.
Keep in mind that the handling of in-the-money options at expiration can vary depending on your broker. Some brokers may automatically exercise in-the-money options unless instructed otherwise. It's essential to check with your specific broker to understand their policies regarding option expiration.
 
Last edited:
Check whether you might possibly realize a profit if you were to purchase a contract when the intraday trend reversed direction (see the circled areas) with a strike price in the neighborhood of the opposite band of the intermediate envelope, and then sold the contract as soon as the indicators suggested price was turning against you.

Screenshot_3.png
 
In looking for stocks that might pull back and then head even higher this morning, I compiled the following list...

Screenshot_3.png


The only two to pull back so far were SAVA and NEXI. But, the latter had an ugly looking chart in my view. (TREX seems to be the most promising prospect, but apparently there are no options for it.) As for SAVA, the cost for a contract with a $24 strike price rose from 0.84 on my initial view to 0.88. However, it as been stuck there ever since.

Screenshot_1.png


According to Motley Fool: "Options trading typically costs between $0.50 and $1 per contract, but there are some brokers that don't charge anything," which if correct, shouldn't be that difficult to cover. However, SAVA's spread between the Bid and the Ask is like 37 cents, and the open interest is a paltry 500.

On the other hand, I could have already pocketed significantly more available profit this hour by purchasing a NADEX in-the-money AUDUSD binary call option with a strike price of 0.65172. (The rate is at 0.65272 with just five minutes left to expiry.) Consequently, given the ease with which I can generate a return via other vehicles, without having to hassle (for the most part) with stuff like the spreads, open interest, Greeks, etc., for the time being at least, I think I'll leave options alone—at least until I'm ready to learn from those who trade them in a more sensible manner, should such a day ever arrive.
 
Last edited:
In options trading, a debit put spread, also known as a bear put spread or long put spread, is a bearish strategy that involves buying a put option and selling a put option with a lower strike price. The goal is to profit from a decline in the price of the underlying asset before expiration.
 
You must log in or register to reply here.
Back
Top