This is when you enter into a position by purchasing one part of the spread at a time rather than buying it all at once.
Legging can improve the risk-reward of the trade if the underlying stock moves in the right direction. If not, it can reduce the potential loss.
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…
A Golden Sweep Option (GSO) is popularized by the folks at Flowalgo and it is basically a very large order that hits the market and takes all or most the inventory/offers at once. This is usually a very high probability signal given the aggressive stance of the trader(s) behind it. These orders can be both bullish…
Options Ratio is basically the number of puts traded divided by the number of calls. It can be applied to an individual stock, a sector, an index, or an entire market. Put/call ratios are generally used in contrary manner. For example, when ratios reach extremely high levels, put buying is unusually high and it could…
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.
This is when you own shares in a particular stock and then you sell Calls against it and then buy Puts. You would use this strategy when you think that the stock rice is a little overdone and you are expecting some downside. This has limited risk due to the long put option, but also…
This is basically a big change in Implied Volatility [IV]. IV gaps higher when the market expects the underlying Stock/ETF to make a big move in the short term. IV can gap lower when an important event, like an earnings report, has passed. The big gap up in the IV can cause the premium of…
