Der beste Broker fur binare Optionen fur 2020!
Ideal fur Anfanger!
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AnyOption Review – A Scam or Legit Online Binary Options Broker?
General Risk Warning! your capital may be at risk
About the company
When choosing a binary options broker, one of the most important factors to consider is their credibility. Anyoption ranks well among the brokerage firms that are credible. Founded in 2008, They can be considered one of the first companies to offer binary options trading services. Owned by Ouroboros Derivatives Trading Limited, it’s one of the few reputable financial trading companies that are regulated by the Cyprus Securities and Exchange Commission (CySEC) as well as governed by the European MiFD regulations. Their CySEC license number is 187/12. Within Europe, AnyOption is licensed to operate in different countries. Among these is Britain where it’s licensed by the British FCA to operate under reference number 603634. AnyOption is also licensed to offer their services to binary options traders in other regions across the globe. Visit AnyOption/regulation to know whether AnyOption is licensed to offer their services in your country.
AnyOption scam or legit binary options broker?
AnyOption has been in business for close to a decade now. To date, Europe remains the region that has the strictest policies aimed at protecting traders from scam binary options brokers in the world. However, since its launch, AnyOption has managed to grow its portfolio of binary options traders from across the globe by providing world class services and good returns on investments.
A little bit more details
Looking at AnyOption web traffic for the last 6 months, about 550,000 binary options traders visited the site. Over a third of these came from Germany. The remaining two-thirds included binary options traders from the United Kingdom and other countries across the globe. The fact that the highest percentage of traders come from heavily regulated European countries is an indicator that AnyOption is a trusted brokerage firm. The site hasn’t experienced any web traffic spikes or dips over the 6 month period we’ve been closely monitoring it. A steady web traffic flow usually indicates that growth is consistent.
Few brokerage firms with a web presence provide their address. The registered address is 24, 28th October Avenue, 2nd Floor, 2414 Engomi Nicosia, Cyprus.
Why should beginner binary options traders consider AnyOption?
First, AnyOption has been offering brokerage services for over 9 years. New binary options brokerage firms might come with nifty features and packages. But being in the game for long gives you some assurance that the brokerage firm isn’t going to go under anytime soon. This, however, doesn’t mean that AnyOption doesn’t offer innovative packages. The company provides great learning resources and tools, and refunds of up to 20%. You’re also provided with several binaries options that include 0-100 trading, Dynamics, Bubbles and many more. It’s also available in 7 different languages making it easy to get started regardless of the region you come from.
AnyOption is undoubtedly one of the best online binary options brokers available today. The company offers a host of easy to use tools, many binary options to trade and a user-friendly interface. Compared to other brokers, AnyOption’s returns are a bit modest. The offer a 20% bonus on newcomers and an average 71% effective return. However, AnyOption has been objectively introducing new binary trading options to enable traders to get high returns on their trades such as DYNAMICS and Bubbles.
The Bubbles Trading feature was introduced in February 2020 as a replacement for 0-100 options. This is a drag and a drop feature that enables you to place a circle (bubble) to the right of the current price. You can then change the size of the circle. As the price changes, it will either inflate or deflate the bubble. Upon expiry, the bubble could burst, meaning you’ve made money on your trade. If it doesn’t burst, you’ve made a loss.
Hint: if you intend to use this options trading tool, you should note that creating a big bubble initially means that your return will be lower. However, making your bubble big is a good way to manage risk especially if your strategy involves taking small profits over an extended period of time.
Do you want to try out Bubbles Trading feature? Click the link to check it out yourself on the official website of AnyOption.
Der beste Broker fur binare Optionen fur 2020!
Ideal fur Anfanger!
2 Platz in der Rangliste! Zuverlassiger Broker!
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Anyoption demo account
There is always that question for beginner traders, is there a Demo? No, they do not offer a Demo account. so if the demo is one of your criteria I recommend you to look at the other top brokers. But on the other hand, they offer you to look at the platform and check all their features. So for the more expeditions trader, this can be a very interesting platform to have a look around in what they have to offer.
Is opening an account recommended?
AnyOption is considered one of the pioneers of online binary options trading. This brokerage firm is composed of experienced options traders and risk management experts. AnyOption also boasts as the first options trading broker to create a browser-based platform. The online binary options trading platform has been used as the base for many of the popular online binary options trading companies. However, through innovation, AnyOption’s web platform remains ahead of the pack by offering unique tools, learning resources and user support for traders. One of the popular white label binary options platforms that are based off the AnyOption platform is SpotOption.
It’s no secret that new binary options brokers focus on offering new options and ways to trade such as the popular Boundary Options and Range Options. Rather than follow this trend, AnyOption’s approach is to develop new tools that make trading easier. For example, the company developed the Option+ and the Binary 100. The former tool allows you to take your earnings or minimize losses while the latter is designed for traders accustomed to the US CFTC binary options trading.
Simplicity and ease of use are the hallmarks of the AnyOption’s user interface. You can view up to four traded options on your screen. A markets news feed is placed below the assets tab making it easy to know when to buy or sell. Keeping track of any purchased binaries is made easy through a colored profit line. If you cannot access the AnyOption online platform, you can subscribe to their SMS service. AnyOption will send you a text message before or after the expiry of your trade. There’s also a share option allowing you to share your wins, trades, and strategies with other traders.
As new brokers come up with new options, AnyOption has stuck to traditional binary option trading methods but continues to innovate and create new tools aimed at helping traders reduce risk and make money. This is the primary reason why AnyOption is recommended for new as well as experienced traders.
No matter how good a business might be, there’s bound to be client complaint or even legal proceedings placed against it. AnyOption is no exception. In order to find out what real traders say about AnyOption, we used a simple method, searching in Google. We used keywords such as AnyOption scam, AnyOption fraud, and AnyOption, a trader complaints. The searches revealed a handful of complaints published in different places such as forums and blog post comments. What was surprising is that many of these complaints were quite detailed. Another surprising discovery is that over 95% of these complaints were from traders who lost their money after making high-risk trades.
It’s important to note that deciding to trade binary options carries some risk regardless of the brokerage firm you invest your money with. That said, AnyOption provides many learning resources to help beginner traders understand the binary options trading business.
How strong is AnyOption Regulated
AnyOption is fully licensed by several financial regulatory bodies including CySEC, MiFID and the British FCA. As we conducted our research on this broker, we discovered that it has actually had legal action taken against it by CySEC. AnyOption’s parent company Ouroboros Derivatives Trading Limited was fined 235,000 Euros by CySEC for non-compliance with a number of sections of L.144 (I)/2007. Some of the reasons why the business was fined included inappropriate advertising material and failure to keep transparent procedures regarding complaints. This action was taken early 2020. Other than that AnyOption has managed to avoid being on the wrong side of the different financial regulators.
Withdrawing your profits or cash balance
One of the common complaints binary options traders have is that it’s difficult to withdraw their profits of accounts balance. AnyOption offers traders two withdrawal options, by a credit card or Wire Transfer
Every withdrawal request is processed within 48 hours and deposited to your account within 2 weeks.
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Anyoption Beginner Trader bonuses
Opening an account with AnyOption doesn’t automatically guarantee that you’ll get a bonus. In order to get one, you’ll need to contact your account representative to get details of any bonuses on offer. AnyOption bonuses are 15X which is a bit low compared to what’s offered by many competing brokers who offer between 20X and 30X bonuses. You have the choice to accept or reject any bonus offer. If you accept it, you have 3 months to reach the turnover.
One thing that makes AnyOption stand out is that you can actually withdraw your account balance even before you reach the bonus turnover. Your money isn’t held by the broker just because you haven’t reached the bonus turnover.
Tools and resources provided by AnyOption
AnyOption online trading platform provides a wide range of tools and resources to help the beginner binary options trader make winning trades. Among the tools and resources available are Social Trading, Bubbles Trading, a Trading Academy, DYNAMICS and Option +.
AnyOption is a web-based platform. Accessing your account only requires an internet-enabled device with a modern web browser. There’s no software to download or update. The platform is well designed with an intuitive user interface. Every tool or asset you need is accessible through a few mouse clicks.
The website is available in 7 international languages including Swedish, French, Dutch, English, German, Spanish and Italian. This makes it accessible to users from different nations.
Beginner traders will also find AnyOption a good binary options trading broker thanks to their rich collection of training resources.
Anyoption Deposit, withdrawals and bonuses
The minimum amount you can deposit into your account is $200. You can place your deposit via wire transfer, credit card or E-Wallet. Withdrawals can only be done via wire transfer or credit card. This helps AnyOption comply with international anti-laundering laws. Bonuses are available. However, you’ll need to contact your account representative to know whether you qualify for bonuses.
For withdrawals, the fees charged will depend on the withdrawal method, amount withdrawn and the number of withdrawals made per month. Here’s a breakdown:
– Wire transfer withdrawals attract $30 fee for more than one withdrawal per month
– Credit card withdrawals attract a minimum of $30 or 3.5% of the withdrawal amount
– For E-Wallet withdrawals, Neteller and Skrill withdrawal attract 3.5% and 2.5% fees respectively
I personally have very good experience with skrill. I recommend the use of this Digital wallet, because of their very low transaction fees, and their Secure safety. Click the link to check it out.
Contact and Support
AnyOption offers 24/7 customer support via telephone and email. They also offer a live chat option which is fast and efficient. The Support is available in English, Spanish, Dutch, Italian, France, Swedish, Polish, Portuguese.
Out of the money Refund
With regard to effective return, AnyOption’s in-money trades attract a 65% to 80% payout. This is a bit low compared to many competing brokers. However, the company makes up by offering an out of money refund of between 5% and 25% which is quite rare among binary options brokers.
Number of assets you can trade and trade expiry time
As with many online brokers, AnyOption offers over 100 assets to trade ranging from stocks to forex. As of the time of writing, AnyOption asset index includes 17 currency pairs, 83 stocks, 27 indices and 4 commodities. Besides traditional currency pairs, forex traders can also buy and sell Bitcoin through this platform.
By the end of 2020, AnyOption was trailing many of its competitors with regard to the expiry times offered. This changed early 2020 with the introduction of new features such as DYNAMIC which allows you to get in and out of a trade within seconds.
Website features, tools, and resources
AnyOption has a number of exciting features which make trading easy even for inexperienced binary options traders. DYNAMICS which came as a replacement for the 0-100 Options allows you to get in and out of a trade within t the expiry time placed on purchased assets.
Traders without access to the internet enabled device can also get SMS updates regarding their accounts. The availability of many learning resources makes it a beginner friendly platform. However, compared to competing online brokers, AnyOption lacks some essential tools and features such as a real-time Virtual Demo which has become somewhat like a standard for all online binary trading platforms.
Overall, AnyOption has proven to be among the leading online binary options trading platforms available today. Launched in 2008, it’s one of the oldest online binary options brokers. Fully licensed and regulated by some of the top European Financial Regulatory bodies, traders can rest assured that it’s not a scam business. AnyOption offers many tools and resources to help beginner traders learn about the markets as well as over 100 asset options. If you’re looking for a legit binary options broker, AnyOption is a good place to open an account.
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General Risk Warning! your capital may be at risk
Options for any market
Discover the strategies used by the pros to make money no matter what the market does. Master the theory behind time-tested techniques via straightforward video lessons and apply them to your own trading in no time.
Strategies for a COVID-19 Market?
Conventional option trading will teach that it is best to sell options when volatility is high and buy when volatility is low. And at the moment volatility has spiked, meaning option premiums are higher than normal. There are many ways to sell option premium, but a favourite of mine is the Iron Condor.
I sold the $281/$282 & $203/$202 Iron Condor on the 27th March for a $30 credit per contract. Expiry date is 17th April, 2020.
The maximum I can lose on this trade is $70 per contract but I have a 28% profitability band. I.e. the SPY needs to stay between 14% either side of the current price. Those levels are 281.30 on the upside and 202.70 on the downside.
I followed the same trade setup criteria as taught in the Module 3: Trade Selection and Strategy (SPY) inside the members area.
Update: 3rd April, 2020
SPY closed at 248.19 on Friday, which is right in the middle of my breakeven bands. The closing price of the option combination was -0.10 or $10 credit. If I were to exit the trade now I will make $20 per contract, which is 29% return on margin. There is still two weeks to go though until expiration, but so far so good.
Социальный трейдинг у брокера бинарных опционов Pocket Option
Брокер бинарных опционов Pocket Option предоставляет своим клиентам множество различных возможностей для трейдинга и старается сделать торговлю максимально удобной. Социальная торговля как раз является тем инструментом, который делает трейдинг более эффективным. С помощью нее у трейдеров появляется возможность совершать больше прибыльных сделок.
Что из себя представляет социальный трейдинг брокера бинарных опционов Pocket Option?
Социальный трейдинг дает возможность видеть и копировать сделки других, более опытных трейдеров. Все сделки можно видеть прям на графике, при чем как в веб-версии платформы, так и в торговом терминале Pocket Option для ОС Windows.
Если говорить о работе социальной торговли, то все просто. Один трейдер совершает сделку на каком-либо активе, а другой трейдер видит ее и может полностью скопировать. Эту полезную функцию можно использовать для того, чтобы:
• Совершить больше прибыльных сделок.
• Понять, как работают более опытные трейдеры.
• Принять решение тогда, когда ситуация на рынке не однозначная.
Кроме повторения сделок, с помощью социального трейдинга вы также можете увидеть:
• Количество сделок конкретного трейдера.
• Процент положительных сделок.
• Объем сделок в валюте и общий оборот.
• Количество трейдеров, пользующихся социальной торговлей.
Имея на руках эту информацию, можно принять решение, сделки какого трейдера лучше всего взять на вооружение, ведь это дает возможность увеличить процент своих положительных сделок и заработать больше.
Новичкам социальный трейдинг дает возможность не потерять весь депозит, получая рекомендации. А трейдерам, чьи сделки копируются чаще всего, выплачиваются дополнительные вознаграждения.
Плюсы и минусы социального трейдинга брокера бинарных опционов Pocket Option?
У брокера бинарных опционов Pocket Option социальный трейдинг дает возможность увеличить в разы число положительных сделок как новичкам, так и более опытным трейдерам. Для новичков это особенно полезно по началу. Также это даст возможность ознакомится с функционалом платформы более подробно.
Для трейдеров с опытом такой вариант совершения сделок может помочь в сложной ситуации, когда принять решение самому сложно. Сделка другого трейдера может послужить сигналом.
И как уже говорилось выше, те трейдеры, чьи сделки копируются чаще всего, могут увеличить свой доход с помощью социального трейдинга за счет вознаграждений.
Из минусов можно отметить то, что постоянное копирование сделок не даст полного понимания рынка. И поэтому научится полноценному трейдингу не выйдет, если все время использовать чужие сделки.
Как воспользоваться социальным трейдингом у брокера бинарных опционов Pocket Option?
У брокера бинарных опционов Pocket Option социальный трейдинг реализован прям на графике нужного вам актива. Чтобы его активировать, нужно нажать на кнопку «Социальная торговля» в правом боковом меню. Там же можно узнать прибыль каждого трейдера, его место в рейтинге за последние 24 часа, историю совершенных сделок и то, какое количество людей отслеживают его сделки.
В разделе социального трейдинга можно начать отслеживать понравившегося вам трейдера или скопировать его сделку. В будущем для копирования сделок вам не обязательно все время по новой открывать данное окно. Все сделки будут показаны на графике и кликнув по нужной сделке она сразу скопируется. Кроме этого, на графике будет показываться процент выигрышных сделок и вознаграждение трейдера.
Общее направление сделок у брокера бинарных опционов Pocket Option
Индикатор всех суммарных сделок — еще одна система, которую могут использовать клиенты брокер бинарных опционов Pocket Option. С ней тоже можно открывать прибыльные сделки. Кнопка для запуска находится в нижней части графика над торговой панелью. Этот индикатор показывает соотношение сделок Call и Put для выбранного вами торгового актива.
Данный индикатор является простейшим «представителем» социального трейдинга и на него не стоит полностью полагаться. В нем сочетаются сделки всех трейдеров, и новичков в том числе. Как вспомогательный инструмент, этот индикатор подойдет, но не более.
Социальный трейдинг — новый инструмент, предлагающий отличные возможности как для новичков, так и для трейдеров с опытом. При правильном использовании можно увеличить свой доход. Но чтобы научится самостоятельному трейдингу, лучше всего будет использовать данный функционал, как вспомогательный и не забывать, что помимо социальной торговли для брокера Покет Опшн есть и сигналы Pocket Option, которые также помогут вам в торговле на платформе. В таком виде от социальной торговли будет намного больше пользы.
Essential Options Trading Guide
Options trading may seem overwhelming at first, but it’s easy to understand if you know a few key points. Investor portfolios are usually constructed with several asset classes. These may be stocks, bonds, ETFs, and even mutual funds. Options are another asset class, and when used correctly, they offer many advantages that trading stocks and ETFs alone cannot.
- An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
- People use options for income, to speculate, and to hedge risk.
- Options are known as derivatives because they derive their value from an underlying asset.
- A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.
What Are Options?
Options are contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price at or before the contract expires. Options can be purchased like most other asset classes with brokerage investment accounts.
Options are powerful because they can enhance an individual’s portfolio. They do this through added income, protection, and even leverage. Depending on the situation, there is usually an option scenario appropriate for an investor’s goal. A popular example would be using options as an effective hedge against a declining stock market to limit downside losses. Options can also be used to generate recurring income. Additionally, they are often used for speculative purposes such as wagering on the direction of a stock.
There is no free lunch with stocks and bonds. Options are no different. Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you usually see a disclaimer similar to the following:
Options involve risks and are not suitable for everyone. Options trading can be speculative in nature and carry substantial risk of loss.
Options as Derivatives
Options belong to the larger group of securities known as derivatives. A derivative’s price is dependent on or derived from the price of something else. As an example, wine is a derivative of grapes ketchup is a derivative of tomatoes, and a stock option is a derivative of a stock. Options are derivatives of financial securities—their value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.
Call and Put Options
Options are a type of derivative security. An option is a derivative because its price is intrinsically linked to the price of something else. If you buy an options contract, it grants you the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.
A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. Think of a call option as a down-payment for a future purpose.
Call Option Example
A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future, but will only want to exercise that right once certain developments around the area are built.
The potential home buyer would benefit from the option of buying or not. Imagine they can buy a call option from the developer to buy the home at say $400,000 at any point in the next three years. Well, they can—you know it as a non-refundable deposit. Naturally, the developer wouldn’t grant such an option for free. The potential home buyer needs to contribute a down-payment to lock in that right.
With respect to an option, this cost is known as the premium. It is the price of the option contract. In our home example, the deposit might be $20,000 that the buyer pays the developer. Let’s say two years have passed, and now the developments are built and zoning has been approved. The home buyer exercises the option and buys the home for $400,000 because that is the contract purchased.
The market value of that home may have doubled to $800,000. But because the down payment locked in a pre-determined price, the buyer pays $400,000. Now, in an alternate scenario, say the zoning approval doesn’t come through until year four. This is one year past the expiration of this option. Now the home buyer must pay the market price because the contract has expired. In either case, the developer keeps the original $20,000 collected.
Call Option Basics
Put Option Example
Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their home from damage. They pay an amount called the premium, for some amount of time, let’s say a year. The policy has a face value and gives the insurance holder protection in the event the home is damaged.
What if, instead of a home, your asset was a stock or index investment? Similarly, if an investor wants insurance on his/her S&P 500 index portfolio, they can purchase put options. An investor may fear that a bear market is near and may be unwilling to lose more than 10% of their long position in the S&P 500 index. If the S&P 500 is currently trading at $2500, he/she can purchase a put option giving the right to sell the index at $2250, for example, at any point in the next two years.
If in six months the market crashes by 20% (500 points on the index), he or she has made 250 points by being able to sell the index at $2250 when it is trading at $2000—a combined loss of just 10%. In fact, even if the market drops to zero, the loss would only be 10% if this put option is held. Again, purchasing the option will carry a cost (the premium), and if the market doesn’t drop during that period, the maximum loss on the option is just the premium spent.
Put Option Basics
Buying, Selling Calls/Puts
There are four things you can do with options:
- Buy calls
- Sell calls
- Buy puts
- Sell puts
Buying stock gives you a long position. Buying a call option gives you a potential long position in the underlying stock. Short-selling a stock gives you a short position. Selling a naked or uncovered call gives you a potential short position in the underlying stock.
Buying a put option gives you a potential short position in the underlying stock. Selling a naked, or unmarried, put gives you a potential long position in the underlying stock. Keeping these four scenarios straight is crucial.
People who buy options are called holders and those who sell options are called writers of options. Here is the important distinction between holders and writers:
- Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights. This limits the risk of buyers of options to only the premium spent.
- Call writers and put writers (sellers), however, are obligated to buy or sell if the option expires in-the-money (more on that below). This means that a seller may be required to make good on a promise to buy or sell. It also implies that option sellers have exposure to more, and in some cases, unlimited, risks. This means writers can lose much more than the price of the options premium.
Why Use Options
Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Speculating with a call option—instead of buying the stock outright—is attractive to some traders since options provide leverage. An out-of-the-money call option may only cost a few dollars or even cents compared to the full price of a $100 stock.
Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.
Imagine that you want to buy technology stocks. But you also want to limit losses. By using put options, you could limit your downside risk and enjoy all the upside in a cost-effective way. For short sellers, call options can be used to limit losses if wrong—especially during a short squeeze.
How Options Work
In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option would be that profits from that event. For instance, a call value goes up as the stock (underlying) goes up. This is the key to understanding the relative value of options.
The less time there is until expiry, the less value an option will have. This is because the chances of a price move in the underlying stock diminish as we draw closer to expiry. This is why an option is a wasting asset. If you buy a one-month option that is out of the money, and the stock doesn’t move, the option becomes less valuable with each passing day. Since time is a component to the price of an option, a one-month option is going to be less valuable than a three-month option. This is because with more time available, the probability of a price move in your favor increases, and vice versa.
Accordingly, the same option strike that expires in a year will cost more than the same strike for one month. This wasting feature of options is a result of time decay. The same option will be worth less tomorrow than it is today if the price of the stock doesn’t move.
Volatility also increases the price of an option. This is because uncertainty pushes the odds of an outcome higher. If the volatility of the underlying asset increases, larger price swings increase the possibilities of substantial moves both up and down. Greater price swings will increase the chances of an event occurring. Therefore, the greater the volatility, the greater the price of the option. Options trading and volatility are intrinsically linked to each other in this way.
On most U.S. exchanges, a stock option contract is the option to buy or sell 100 shares; that’s why you must multiply the contract premium by 100 to get the total amount you’ll have to spend to buy the call.
|What happened to our option investment|
|May 1||May 21||Expiry Date|
The majority of the time, holders choose to take their profits by trading out (closing out) their position. This means that option holders sell their options in the market, and writers buy their positions back to close. Only about 10% of options are exercised, 60% are traded (closed) out, and 30% expire worthlessly.
Fluctuations in option prices can be explained by intrinsic value and extrinsic value, which is also known as time value. An option’s premium is the combination of its intrinsic value and time value. Intrinsic value is the in-the-money amount of an options contract, which, for a call option, is the amount above the strike price that the stock is trading. Time value represents the added value an investor has to pay for an option above the intrinsic value. This is the extrinsic value or time value. So, the price of the option in our example can be thought of as the following:
|Premium =||Intrinsic Value +||Time Value|
In real life, options almost always trade at some level above their intrinsic value, because the probability of an event occurring is never absolutely zero, even if it is highly unlikely.
Types of Options
American and European Options
American options can be exercised at any time between the date of purchase and the expiration date. European options are different from American options in that they can only be exercised at the end of their lives on their expiration date. The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type. Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option. This is because the early exercise feature is desirable and commands a premium.
There are also exotic options, which are exotic because there might be a variation on the payoff profiles from the plain vanilla options. Or they can become totally different products all together with „optionality“ embedded in them. For example, binary options have a simple payoff structure that is determined if the payoff event happens regardless of the degree. Other types of exotic options include knock-out, knock-in, barrier options, lookback options, Asian options, and Bermudan options. Again, exotic options are typically for professional derivatives traders.
Options Expiration & Liquidity
Options can also be categorized by their duration. Short-term options are those that expire generally within a year. Long-term options with expirations greater than a year are classified as long-term equity anticipation securities or LEAPs. LEAPS are identical to regular options, they just have longer durations.
Options can also be distinguished by when their expiration date falls. Sets of options now expire weekly on each Friday, at the end of the month, or even on a daily basis. Index and ETF options also sometimes offer quarterly expiries.
Reading Options Tables
More and more traders are finding option data through online sources. (For related reading, see „Best Online Stock Brokers for Options Trading 2020“) While each source has its own format for presenting the data, the key components generally include the following variables:
- Volume (VLM) simply tells you how many contracts of a particular option were traded during the latest session.
- The „bid“ price is the latest price level at which a market participant wishes to buy a particular option.
- The „ask“ price is the latest price offered by a market participant to sell a particular option.
- Implied Bid Volatility (IMPL BID VOL) can be thought of as the future uncertainty of price direction and speed. This value is calculated by an option-pricing model such as the Black-Scholes model and represents the level of expected future volatility based on the current price of the option.
- Open Interest (OPTN OP) number indicates the total number of contracts of a particular option that have been opened. Open interest decreases as open trades are closed.
- Delta can be thought of as a probability. For instance, a 30-delta option has roughly a 30% chance of expiring in-the-money.
- Gamma (GMM) is the speed the option is moving in or out-of-the-money. Gamma can also be thought of as the movement of the delta.
- Vega is a Greek value that indicates the amount by which the price of the option would be expected to change based on a one-point change in implied volatility.
- Theta is the Greek value that indicates how much value an option will lose with the passage of one day’s time.
- The „strike price“ is the price at which the buyer of the option can buy or sell the underlying security if he/she chooses to exercise the option.
Buying at the bid and selling at the ask is how market makers make their living.
The simplest options position is a long call (or put) by itself. This position profits if the price of the underlying rises (falls), and your downside is limited to loss of the option premium spent. If you simultaneously buy a call and put option with the same strike and expiration, you’ve created a straddle.
This position pays off if the underlying price rises or falls dramatically; however, if the price remains relatively stable, you lose premium on both the call and the put. You would enter this strategy if you expect a large move in the stock but are not sure which direction.
Basically, you need the stock to have a move outside of a range. A similar strategy betting on an outsized move in the securities when you expect high volatility (uncertainty) is to buy a call and buy a put with different strikes and the same expiration—known as a strangle. A strangle requires larger price moves in either direction to profit but is also less expensive than a straddle. On the other hand, being short either a straddle or a strangle (selling both options) would profit from a market that doesn’t move much.
Below is an explanation of straddles from my Options for Beginners course:
And here’s a description of strangles:
How to use Straddle Strategies
Spreads & Combinations
Spreads use two or more options positions of the same class. They combine having a market opinion (speculation) with limiting losses (hedging). Spreads often limit potential upside as well. Yet these strategies can still be desirable since they usually cost less when compared to a single options leg. Vertical spreads involve selling one option to buy another. Generally, the second option is the same type and same expiration, but a different strike.
A bull call spread, or bull call vertical spread, is created by buying a call and simultaneously selling another call with a higher strike price and the same expiration. The spread is profitable if the underlying asset increases in price, but the upside is limited due to the short call strike. The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one. Similarly, a bear put spread, or bear put vertical spread, involves buying a put and selling a second put with a lower strike and the same expiration. If you buy and sell options with different expirations, it is known as a calendar spread or time spread.
Combinations are trades constructed with both a call and a put. There is a special type of combination known as a “synthetic.” The point of a synthetic is to create an options position that behaves like an underlying asset, but without actually controlling the asset. Why not just buy the stock? Maybe some legal or regulatory reason restricts you from owning it. But you may be allowed to create a synthetic position using options.
A butterfly consists of options at three strikes, equally spaced apart, where all options are of the same type (either all calls or all puts) and have the same expiration. In a long butterfly, the middle strike option is sold and the outside strikes are bought in a ratio of 1:2:1 (buy one, sell two, buy one).
If this ratio does not hold, it is not a butterfly. The outside strikes are commonly referred to as the wings of the butterfly, and the inside strike as the body. The value of a butterfly can never fall below zero. Closely related to the butterfly is the condor – the difference is that the middle options are not at the same strike price.
Because options prices can be modeled mathematically with a model such as the Black-Scholes, many of the risks associated with options can also be modeled and understood. This particular feature of options actually makes them arguably less risky than other asset classes, or at least allows the risks associated with options to be understood and evaluated. Individual risks have been assigned Greek letter names, and are sometimes referred to simply as „the Greeks.“
Below is a very basic way to begin thinking about the concepts of Greeks:
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