Education

If you sell a certain type of option and you already have or get the thing you're supposed to sell through that option, you're called a covered call writer. EXAMPLE:…

Combination positions are positions in more than one option at the same time. Spreads and straddles are two types of combination positions. A spread involves being both the buyer and…

The rules of the options markets generally limit the maximum number of options on the same side of the market (i.e., calls held plus puts written, or puts held plus…

A range option is a European-style, cash-settled option that has a payout if the value of the underlying interest falls within a specific range of values (the range length) at…

A binary option is a cash-settled option having only two possible payoff outcomes: either a fixed amount or nothing at all. Some binary options are referred to as “fixed return…

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…

In the case of a physical delivery option, the exercise price (which is sometimes called the “strike price”) is the price at which the option holder has the right either…

No.  Investors look to the confirmations and statements that they receive from their brokerage firms to confirm their positions as option holders or writers. An option holder looks to the…

If a physical delivery put option is exercised, the assigned writer must purchase the required number of shares at the specified exercise price regardless of their current market price. If…

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…