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 price upon exercise prior to the expiration of the option.
This is when you sell a call and buy a call with a higher strike price. A Bear Call Spread is used when you have a bearish outlook on a stock and you want to bet against it by going short but you don’t want to shirt the stock because it theoretically has unlimited risk….
What is an Option Sweep? An option sweep is basically when a big trader breaks up a large order into small individual trades. This is usually done in order to get filled fast or to conceal a large order. The common thinking is that a sweep usually means a big trader knows something and is…
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.
Time value is whatever the premium of the option is in addition to its intrinsic value. Time value is that part of the premium that reflects the time remaining before expiration. An American-style option may ordinarily be expected to trade for no less than its intrinsic value prior to its expiration, although occasionally an American-style…
When an option seller or writer receives an exercise notice, assignment has occurred. When assigned, writers must deliver the goods (shares or cash). For example, let’s say you sold 1 AAPL 145.00 CALL and the buyer decides to exercise the contract at expiration because AAPL is now trading at 146, you would need to deliver…
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…
