The underlying of an option contract is the stock, ETF, commodity or index that the options trade against. The price movement and volatility of the underlying affects the pricing of the option throughout its lifespan.
The strike price is the agreed cost per share that the holder may either buy or sell the underlying stock when exercising the contract. The strike price remains the same until the contract expires and is critical in determining the contract's price.
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 bear trap encourages bearish traders to place shorts on stock options since they expect the underlying prices to go down. But this doesn't happen. Instead, it either stays the same or starts increasing.
A technique of using options in multiple ways to gain profit from underlying stock when it is moving downwards. It is necessary to identify how far the stock will go down and the time frame during which the decline will happen in order to select the optimum trading stra[click to read more]