What is the Options Cap Interval?

This is a spread strategy that involves selling options and buying a greater number of out-of-the-money options. Backspreads are often in a ratio of 1 to-2 or 2-to-3 and most traders use them because they work well when there is an increase in market volatility especially when they think the market is about to move…

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…

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…

This is the difference between the current bid price and the current asking, or offering price. For example, if you see a quote that looks like this: 2.05 x 3.10 – what this means is that the bid is 2.05 and the ask is 3.10. Therefore the bid-ask thread is 1.05 i.e the difference between…

The option writer is obligated—if and when assigned an exercise—to perform according to the terms of the option. The option writer is sometimes referred to as the option seller. An option writer who has been assigned an exercise is known as an assigned writer. Example:If a physical delivery XYZ call option is exercised by the…

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…