Option Basics

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XYZ AUGUST 70 CALL AT $3.10
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where XYZ is the name of the stock
August is the expiration date
70 is the strike price
Call is the option type
$3.10 is the premium

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Buyer – LONG – buy to open – debit

Buyer – LONG – sell to close – credit

Seller – SHORT – sell to open – credit

Seller – SHORT – buy to close – debit

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How to Read an Option Pricing Diagram
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APR 17 (10) 100 (weekly)
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Where option expires on the 1st Friday of April 2017
10 days left
“100” represents the multiplier. i.e 1 option rep 100 underlying shares

Weekly option. If NO indication, means monthly option

* Monthly option expires on the 3rd Friday of the month

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Option Pricing and the Greeks
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Pricing = IV + TVM 
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where IV is impacted by SPOT and STRIKE price
where Time Value of Money is impacted by – Time Value of Money – further from expiration, more valuable the option

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– Higher Volatility – higher option price

– Interest Rate – Not much impact for options that have > 60 days to expiration
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