DTE means Days To Expiration. This is basically the number of days left until your Option contracts expire.
As an options trader you will want to play very close attention to the DTE when you are selecting which contract to buy or sell.
The number of days to expiration can impact the profitability of a trade simply because of Time decay/theta.
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 basically any spread where the premium paid from buying part of the spread is greater than the premium received for the other part of the spread. For example if you bought the GOOGL 95.00 Calls for 8.00 and sold the 100.00 Calls for 5.50 the debit would be 2.50 See also: Credit Spread,…
These are options contract with no intrinsic value. A Call option is OTM when the strike price is above the current market price. A Put option is out-of-the-money when their strike price is below the current market price of the current market price. You should also check out In The Money Options & At the…
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…
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…
This is basically the level of volatility reflected in the current options prices. Each options contract has a unique level of implied volatility that is computed using an options pricing model. The Implied Volatility (IV) is fluid and consistently changing. When the IV is high, it indicates that the option premiums are expensive. When the…
