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A binary option is a financial product where the parties involved in the transaction are assigned one of two outcomes based on whether the option expires in the money. Binary options depend on the outcome of a "yes or no" proposition, hence the name "binary." Binary options have an expiry date and/or time.
Options are financial contracts that provide exposure to the price movements of a stock without you having to own that stock.
Call options give you the right to BUY a stock at a pre-determined price (the "Strike Price").
One of the easiest, least time consuming, and least expensive tools to start with on your journey toward financial freedom is trading options.
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- Premium: The money you pay to buy the option contract.
- Out of the money: In this scenario the option SELLER wins.
- In the money: When an option enables you to transact the underlying stock for a BETTER price than you can get anywhere else. In this scenario, the BUYER wins.
- Probability OTM: probability of expiring "out of the money". Probability of success or failure.
- IV (Implied Volitility) Percentile: Number that signals the magnitude of ups and downs expected for a stock in the coming days and months.
- High IV: Roller Coaster Price Movements
- Low IV: Minimal Price Movements
- Spread:
- Naked Position:
- Risk Defined Trades:
- Sell +70% Probability of Success
- Never risk more than you can afford to lose on any one trade
- Stay disciplined & follow the system
- Use payoff diagrams
- The 10-Minute Talk That EVERY Trader Needs to Hear
- Cut losses in appropriate place
- Swing Trading: ...
- Day Trading: similar to scalping
- Scalping: pinpoint short movements; need to have patience
- Position Trading
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- buy if bullish
- sell if neutral/bearish
- buy if bearish
- sell if neutral/bullish
- Superior flexibility
- Strike, expiration, greek variables, strategies
- Much more leverage
- You can be wrong and still make money
- selling options OTM/ATM
- Portfolio management
- Options offer much more flexibility than stock
- Probability of success greatly increases with options
- Greater ROC can be possible using options
options can be used to trade 100 shares of stock
expiration date(no such attribute on stocks); afterexpiration date, option no longer existsstrike priceprice at which the option can be converted into shares of stock.option contract multiplier: (strike price) * 100 =>option premium(option value)
- call
option: prices will increase as the stock price increases and will decrease as the stock price decreases (the ability to purchase shares in units of 100 at the strike price)
- SPY all time high
- Low Volitility Environment
- Long Vega
Overview: A strategy where an investor buys a stock and sells a call option at the same time.
Short Term Dating Strategy.
buying the stock(bullish) and at the same timeselling a covered call(neutral)
- Uptrending Stocks
- Stocks with higher trading volumes
- Options with higher trading volumes (open interest/volume)
- Options with "tight" bid/ask spreads
- Some investors look for:
- A stock breaking through resistance level
- Bull flag setup (Close Above High of Low Day, or CAHOLD)
- Bounce off support
- A buy-write can lower the effective cost of buying the stock.
- If the stock is called out, investors may look to repeat the trade, if appropriate.
- If the stock is NOT called out and the call expires worthless, there is the opportunity to sell another covered call against the same shares to generate additional income.
- This strategy limits upside stock gain potential.
- This is a more capital intensive strategy, and there is always the risk of loss in the stock value.
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Symbol Prefix
/means trading futures
- SYMBOL:
/NG(Natural Gas) - EXPIRATION DATE:
May, 21, 2022 - STRIKE PRICE:
120CALL
-
100shares =1contract
- A long call is a (bullish) position.