An option is 'out of the money' in two different scenarios: First, a call option is out of the money when the contract has a strike price higher than the current market price of the underlying stock. Second, an Out of The Money put has a strike lower than the current market price of the underlying stock. An Out of the money option's premium has no intrinsic value and therefore the premium consists exclusively of time value.
Strategies, Market Groups, and Criteria, Oh My! This short article will bring you up to speed with all the terminology used throughout the Brutus Options Ranker to get you started building your own options trading strategies in no time!
A put option contract gives the owner the right (but not the obligation) to sell 100 shares of the asset at the strike price any time before expiration. If you sell a put option, you have the obligation to purchase those 100 shares from the owner.
A type of butterfly spread which is skewed to create reward in a single direction within a current range and has risk if the underlying moves in the correct direction, but beyond the expected move implied by current option prices. This is achieved by setting up a normal butterfly spread but then skipping, or moving further out of the money, the final protective put or call. [click to read more]
A strategy with an upfront cost (debit) that profits if the underlying (stock) rises in price. This spread involves buying two calls with the same expiration date, but with a different strike price. A bull call spread aims to reduce the upfront cost of buying call options in order to profit from stocks that are expected to rise moderately. [click to read more]
A strategy with the goal of profiting from most market condition: up, down, or range-bound by selling more out of the money calls than in the money call are purchased. The risk in this trade is if the underlying appreciates too quickly beyond the expected move implied [click to read more]
A call options trading strategy in which a neutralized position is established by writing high premium near month out of the money calls and buying simultaneously further month at the money call option contracts to take advantage of time decay of near term calls. The mo[click to read more]
Gamma is an Options Trading Greek which determines the rate of change in option's delta with a 1-point move in the underlying asset. I.e., Gamma describes how Delta is expected to change with moves in the underlying (stock).