By Bayo
We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics' articles, you should be able to understand options and how to utilize options to either profit or protect your stock.
As we mentioned before, when buying an option contract, you are given the right to buy or sell a stock at a specified price. However, the right doesn't last forever, and the contract becomes obsolete after the expiration date.
An expiration date is the last day that option contracts are valid. American options can be exercised at any time before the maturity date. European-exercise options can be exercised and assigned only at expiration.
As the example below, there are different expiration dates when trading options. The final trading day for an option is commonly the day of expiration.
As the option approaches its expiration date, the option's premium stems mainly from the intrinsic value. At expiration, the owner may exercise the right or, if the option has no value to the holder, let it expire without exercising it. Thus, timing really makes sense.
In general, the longer an option has to expire, the more time its stock price has to reach its strike price and thus the more time value it has. Buying options near expiration cost less but expire soon, while options with more time to develop profitably cost more. Options Investors should consider fully and take different strategies.
Please stay with us for more on options basics!
If there is anything that you didn't understand in today's Options Basics article, simply leave a comment below and we will try to explain more to you!
Source: Investopedia
Comment(21)
1a. If I SELL an American CALL option and the buyer exercise it, does Futu immediately sell my shares to him?
1b. What if I don’t have those shares?
1c. If I SELL an American PUT option and the buyer exercise it, does Futu immediately use funds in my account to buy his shares?
1d. What if I don’t have the full amount in my account? Eg it will cost $2000 but I only have $1000?
where can I learn more I don't know shit just investing blindly and hoping for best
when will be the option trading available ? please allow more legged trading in an option and only block a portion of our buying power. this is what we looking for . especially someone doing a debit spread or collecting a credit spread
sorry, i m very confuse with call option. mean any stock also possible is it
Call = right to buy
Put = right to sell
If I Buy a call = I have The right (I cannot be forced) to buy xx stock at $Y
If I Buy a Put = I have the right (I cannot be forCed) to sell xx stock at $Y
If I Sell a call = I promise to let my call buyer have the right to buy xx stock from me at $Y. If he wishes to exercise his option, I must fulfil my promise.
If I Sell a put = I promise to let my put buyer have the right to sell xx stock to me at $Y. If he wishes to exercise his option, I must fulfil my promise.
Hi,
1. If the buyer exercise the call option, the seller is asked to fulfill obligation in a short time.
2. If the cash is adequate in account, the platform will use it to buy the shares and sell to the option holder; if not, the mechanism will like shorting stocks and you need to buy stocks to close the position.
3. if the margin including stocks and cash is insufficient, firstly you will receive the margin call...
For more implementation details, you can consult customer service.
Thank you.
Hi, We have some topics for investment education, like the topic called Options Basics, which aims to provide essential options trading guide, and you can subscribe it.
Our teams will try to provide more content of investment education. Let's make investing easier and not alone. Thanks you.
the calls and puts that is transacted under the moomoo platform are American options, not European options? Or is there a choice to select which kind of options we can purchase or sell?
If my sell put option expires today and the stock price (i.e. 11.22) is lower than my strike price (i.e. $12). Can i close the contract by buying back the contract as I do not wish to exercise the contract? how to do it in Moo Moo? urgent.
if the option expired, will it be removed from the position list automatically and when will it be? where can i find the historical transaction detail?
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Please
What does it mean why you buy put and buy call?
Hi, I am also Searching on how to bUy back the Options… how to do it in moomoo?
Who decides the expiration date the writer or buyer?
Does moomoo support option strategy?
how do I know it’s American options or European options ?
European Style Options: can be exercised only at expiration.
American Style Options: can be exercised at any time prior to expiration.
Hi, what kind of strategy do you mean?
Hi, example like, vertical spread.
Good
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