Ask Definition

This method is normally used when Options are overpriced. The trader would simply buy stocks in the open market and sell the equivalent position in the options market. This is done because the trader sees that the Options price is too high and anticipates that it will eventually decrease. So he/she decides to cash in…

There are some options settle for cash rather than shares. Indexes like the S&P 500 Index (.SPX) and the S&P 100 Index (.OEX) are examples of cash settled options.

These are Option contracts that have intrinsic value. A call option is ITM if the market price of the underlying asset is greater than the strike price of the option. A put is ITM if the price of the underlying asset is less than the strike price. In the image below, “A” marks the In…

This is the process of satisfying put exercise or call assignment. In either case, stock is delivered. In the case of indexes, delivery involves the transfer of cash equal to the settlement value of the index minus the strike price of the options contract. See also: Options Assignment, Automatic Exercise, American Style Option

This is when you sell Put options with the intention or to take delivery of the underlying shares. Cash is deposited in the account and, if the stock price falls to the strike price of the put option, you get the delivery of the shares into the account once the Options expire.

The time Value of Options refers to the value of the options contract beyond its intrinsic value. Time value is equal to the extrinsic value of the options contract. Out-of-the-money options consist only of time value. The value of in-the-money options can include both intrinsic value and time value. See also In The Money Options,…