Moneyness of an option refers to the relationship between the current price of the underlying asset and the strike price of the option. An option can be classified as in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM) based on its moneyness. In-the-Money (ITM) Option – Moneyness of an option An ITM option is one where the…
Underlying asset is a financial instrument or a physical commodity that serves as the basis for a financial derivative. In this article, let us delve deeper into the subject with examples. Introduction In the financial market, an underlying asset is a financial instrument or a physical commodity that serves as the basis for a financial…
Options trading has been in vogue for more than a century. Over the Counter (OTC) custom options were available on commodities since the 1920s, while options on equities started trading on the Chicago Board Options Exchange (CBOE) in 1972. Options on currencies and bonds were introduced in the late 1970s, which were also traded OTC….
Implied Volatility (IV) Is a measure of how much people think the price of a stock or option might change in the future. What is Implied volatility Implied Volatility (IV) Is a measure of how much people think the price of a stock or option might change in the future. It’s like trying to predict…
An option is like a bet that you make with someone else about what you think will happen to a particular stock in the future. Trading in Shares When we talk about the stock market, we are talking about companies that sell small pieces of themselves called “shares.” When you buy a share, you own…
In this article, 7 notable differences between European options and American options, are listed and see how Indian market adopted these option types. Exercise Date European options (EO) can only be exercised on their expiration date (option buyer will have to wait until the expiry date for exercising his right), while American options (AO) can…