Moneyness

This is the process of carrying out the terms of an options contract. A call buyer can exercise his or her right to buy the stock at the strike price. A put owner can exercise his or her right to sell the contract. See also: Exercise Price, Exercise Settlement Value, Automatic Exercise

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 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…

A binary option is a cash-settled option having only two possible payoff outcomes: either a fixed amount or nothing at all. Some binary options are referred to as “fixed return options.” As of the date this product was approved for trading, the only binary options approved for trading (other than credit default options, as defined…

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…

The cap price is the level that the automatic exercise value of a capped option must reach in order for the option to be automatically exercised. The cap price of a call option is above, and of a put option below, the exercise price of the option.