European Style Option

Order Flow is basically the study of the way a stock reacts to the limit or market orders that are placed at certain price levels.  When it comes to Unusual Options Activity, the order flow principles are the same, in that you want to pay attention to how the Option price, and the price of…

This is a spread  where the premium received from selling part of the spread is greater than the premium paid for the other part of the spread. For instance, if you sold the AAPL 140.00 Calls @ 4.00 and bought the AAPL 142.00 Calls for 2.00 you have a credit of 2.00. See also Bear…

The option writer is obligated—if and when assigned an exercise—to perform according to the terms of the option. The option writer is sometimes referred to as the option seller. An option writer who has been assigned an exercise is known as an assigned writer. Example:If a physical delivery XYZ call option is exercised by the…

Options with intrinsic value, or in-the-money options, are automatically exercised at expiration so that option holders don’t inadvertently leave money on the table. Since June 2008 , all options that are a penny or more in-the-money at expiration are exercised at expiration.

The cap interval is a constant established by the options market on which a series of capped options is traded. The exercise price for a capped-style option plus the cap interval (in the case of a call), or minus the cap interval (in the case of a put), equals the cap price for the option….

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.