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 basically any spread where the premium paid from buying part of the spread is greater than the premium received for the other part of the spread. For example if you bought the GOOGL 95.00 Calls for 8.00 and sold the 100.00 Calls for 5.50 the debit would be 2.50 See also: Credit Spread,…
This is also known as a Crossed Trade and it is basically a transaction/trade that is done from one broker to another ( broker to broker) rather than in the open market place. See Also Option Conversion
This is a spread where the premium received from selling part of the spread is greater than the premium paid for the other part of the spread. For instance, if you sold the AAPL 140.00 Calls @ 4.00 and bought the AAPL 142.00 Calls for 2.00 you have a credit of 2.00. See also Bear…
This is when you put on a short option position and hedge it with another option position or with long shares. This is essentially the opposite of a naked write.
This is when you sell a straddle against shares that you already own. It is important to note that the covered straddle is not really fully covered since only the calls are covered. The strategy has a bullish bias.
A covered call is executed when you buy the underlying stock/shares and then sell Calls against it. The trade is considered covered because the shares will cover what is now a short Call position. So this means the shorting/sale of the Calls was not “naked”. This method can be used to generate income using stock…
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…
The condor is basically a combination of a bull call spread and a bear call spread. Essentially, options with consecutive strike prices, buying options with a lower exercise price, and options with higher exercise price. The condor is generally created using the same numbers of short and long calls (or puts). You will nee to…
This is when you own shares in a particular stock and then you sell Calls against it and then buy Puts. You would use this strategy when you think that the stock rice is a little overdone and you are expecting some downside. This has limited risk due to the long put option, but also…
