Stocks and options for dummies
If they see an increase in the option they bought they stocks and options for dummies most likely sell the option and take their profit. Now I'm going to give some advice. The Intrinsic Value doesn't decay, just the Time Value. You can probably guess by now that the closer the market price is to the strike price, the more the option is worth.
A quick side note about how option premiums are stated. Now before getting into those responsibilities, lets talk about some important characteristics of an option contract and stocks and options for dummies we'll build slowly on an example. A Call Option is said to have intrinsic value if the current market price is above the strike price. In reality many people do not buy and hold the option that long.
That depends on your personal belief on how IBM stock will behave. Which means the person selling you the contract is actually giving you that right. Even the best and stocks and options for dummies investment professionals cannot predict price movement especially over the short term. To summarize, a Call Option gives you the right to buy low while a Put Option gives you the right to sell high. You can probably figure out the rest of the circles if you've seen stock quotes.
A couple of things to point out is the pricing standard and the highted area. You will see below: It's stated that way because one option controls shares. Now you know that as time proceeds the stocks and options for dummies in Time Value will decrease the value of your option. One option contract is good for shares of that underlying stock.
You may be asking yourself, well so what? An option will expire at the close of the third Friday of the stated expiration month. An option contract will always have what's called a Strike Price.
You have to be very careful when trading options. Remember that buying the option contract gives you that right. That's where another very important characteristic comes into play and that is Call vs Put.