A call option is deep in-the-money when the strike price is well below the current market price.
A put option is deep-in-the-money when the strike price is much higher than the current market price.
On the Option Chain below, box “A” shows us the Deep in the Money Calls and box “B” shows the Deep In The Money Puts.
See also: At The Money Option
The time Value of Options refers to the value of the options contract beyond its intrinsic value. Time value is equal to the extrinsic value of the options contract. Out-of-the-money options consist only of time value. The value of in-the-money options can include both intrinsic value and time value. See also In The Money Options,…
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…
This is the process of satisfying put exercise or call assignment. In either case, stock is delivered. In the case of indexes, delivery involves the transfer of cash equal to the settlement value of the index minus the strike price of the options contract. See also: Options Assignment, Automatic Exercise, American Style Option
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 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…
