What are the key terms in options trading?
- 1月28日
- 讀畢需時 1 分鐘
Underlying Asset: The stock that the option contract is based on (e.g., Apple Inc. (AAPL)).
Strike Price: The price at which you can buy or sell the underlying stock if you choose to exercise the option.
Expiration Date: The last day the option contract is valid. All options are "wasting assets" and will expire worthless if not exercised or sold before this date.
Premium: The price you pay to purchase the option contract. This is your maximum potential loss.
In-the-Money (ITM): A call option is ITM if the stock price is above the strike price. A put option is ITM if the stock price is below the strike price.
Out-of-the-Money (OTM): A call option is OTM if the stock price is below the strike price. A put option is OTM if the stock price is above the strike price. OTM options expire worthless.
Intrinsic Value: The amount by which an option is in-the-money. For a call, it's the stock price minus the strike price. For a put, it's the strike price minus the stock price.
Extrinsic Value (Time Value): The portion of an option's premium that is not intrinsic value. It is the value of the chance that the option will become profitable before it expires. This value decays over time, especially as the expiration date nears.
