What is a cash-settled option?

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.

An Iron Butterfly is a trade that is created by putting on a Short Straddle (selling at the money puts and calls) and a Long Straddle (buying out of the money puts and calls). These types of trades limit the amount of money that you can make and it also limits the potential loss. But…

The point at which a strategy produces no profit and no loss.

This is when you sell an options contract and simultaneously buy one with a later expiration date and a higher or lower strike price. For example, if your sell to open the AAPL NOV 145.00 Call and then buy to open the AAPL DEC 150.00 Call , you have created a diagonal spread. See also:…

The holder of a physical delivery XYZ call option has the right to purchase shares of XYZ Corporation stock at the specified exercise price upon exercise prior to the expiration of the option. The holder of a physical delivery XYZ put option has the right to sell shares of XYZ Corporation at the specified exercise…

A capped option will be automatically exercised prior to expiration if the options market on which the option is trading determines that the value of the underlying interest at a specified time on a trading day “hits the cap price” for the option. Capped options may also be exercised, like European-style options, during a specified…