Reading Links

* All-Time High Volatility: What�s a Trader or Investor to Do? by IITM.com* The VIX Stretch by Optionetics:* VIX Options as Catastrophe Insurance by Vix and More.* Stock Market Trading Method by Kevin�s Market Blog.* How to Recognize Market Capitulation by Trading Market.* Forex Buyers Guide - Forex Guides and Tips.* Trader�s Blog: This blog provides many trading educational articles. Check out many of great articles under the Categories of Traders Toolbox, Technical Indicators, and Trading Tips & Techniques.FYI, if you want to get alerts on the latest update of Trader's Blog postings, you can also subscribe to their �Trader�s Blog�s Alert...

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Options Transactions

In stock trading, there are only 2 types of transactions: To buy or to sell.In option trading, there are 4 different types of Option Transactions:1) Buy To Open2) Buy To Close3) Sell To Open4) Sell To Close.The type of transaction that an option trader will make depends on whether he/she is an Option Buyer or Option Seller/Writer.For an Option Buyer, the following are the types of transaction he/she will make:1) Buy To OpenWhen an Option Buyer wants to open / enter a �long� position on a certain option contract, he will need to do a �Buy To Open� transaction.For example: When an option trader wants to buy a straight Call option to take advantage of current upward trend.2) Sell To CloseWhen an Option Buyer wants to close the �long� position he entered previously, he will need to do a �Sell...

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Main Factors that Affect Option�s TIME VALUE

As mentioned in �Option Price Components�, option price or premium consists of:For ITM Option:Option Price = Intrinsic Value + Time ValueFor ATM and OTM Options:Option Price = Time ValueWhereas:Intrinsic Value of ITM CALL Option:Intrinsic Value = Current Stock Price � Strike Price.Intrinsic Value of ITM PUT Option:Intrinsic Value = Strike Price � Current Stock Price.As you can see from the above formula, Intrinsic Value of an option is very straightforward.It�s simply the difference between option�s strike price and current stock price.Time Value component of an option is the one that make an option very complicated to understand.Time Value of an option would be mainly affected by:1) Degree of Options MoneynessAs discussed in this post, Options Moneyness describes the relationship between...

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