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Here’s how options work, the benefits and risks of options and how to start trading options. Skip to main content. 24/7 Help. For premium support please call: 800-290-4726 more ways to reach us ...
This options trading strategy is the flipside of the long put, but here the trader sells a put — referred to as “going short” a put — and expects the stock price to be above the strike ...
Because of the risk that an option can become worthless, ... The options trader makes a profit of $200, or the $400 option value (100 shares * 1 contract * $4 value at expiration) minus the $200 ...
Options traders are at the mercy of the bid-ask spread, which is the difference between what sellers are asking for an asset and what buyers are willing to pay (bid). If there is a big difference ...
By selling the option early in that situation, the trader can realise an immediate profit. Alternatively, the trader can exercise the option – for example, if there is no secondary market for the options – and then sell the stock, realising a profit. A trader would make a profit if the spot price of the shares rises by more than the premium.
For instance, if an option goes from being in the money to out of the money, the trader must rapidly trade enough of the underlier so that the position after expiration will be flat. For example, a trader is long 10 calls struck at $90.00 on IBM stock, and five minutes before the close of trading, IBM's stock price is $89.75.
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