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From Investopedia.com:
What Does Strike Price Mean? The price at which a specific derivative contract can be exercised. Strike prices is mostly used to describe stock and index options, in which strike prices are fixed in the contract. For call options, the strike price is where the security can be bought (up to the expiration date), while for put options the strike price is the price at which shares can be sold.
The difference between the underlying security's current market price and the option's strike price represents the amount of profit per share gained upon the exercise or the sale of the option. This is true for options that are in the money; the maximum amount that can be lost is the premium paid.
Also known as the "exercise price".
What Does Call Mean?1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.
2. An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.
What Does Put Mean? An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time. The buyer of a put option estimates that the underlying asset will drop below the exercise price before the expiration date.
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What are calls and puts?
Calls and Puts are two types of stock options. Like stocks they fluctuate in price and can be bought and sold. Put and call options represent contracts between the option buyer and the option seller concerning the purchase or sale of the underlying stock at a predetermined price and within a specific time frame. This predetermined price is termed the strike price. Each contract controls 100 shares of the underlying stock, making options a leveraged tool. For much more information on calls and puts visit http://www.safe-options-trading-income.com
What is a strike price for stock?
The strike price is the heart of the futures market. If you are dealing in puts, the strike price is the price below which the option exercises. If I sell a put on Acme at $10, I can be required to buy the security if it falls to $9.95. In calls, if the share price goes above the strike price the option exercises--if I sell a call on Acme at $10, the option executes if the share price hits $10.05.
What happens to put options when a company goes bankrupt?
What happens is the put writer gets hosed. If a company goes into Chapter 7 bankruptcy, all its stock becomes worthless. Unfortunately for the people who wrote put options on the company's stock, those do NOT become worthless. If the put buyer decides to exercise the option - and he will - the writer has to buy all those shares of worthless stock at the strike price.
What is an option?
An option is the right to buy or sell the underlying commodity (e.g., stock) during a specific future time at a predetermined price. The price or cost of an option is called a "premium". The factors which determine an option's value are: 1. Price of the underlying 2. Time to Expiry 3. Strike of the option 4. Volatility of the underlying General Electric stock is currently trading at $34.00. You purchase a Call option ("right to buy") X shares of GE stock at $30.00 on 17 Nov 2006. Underlying = X shares of General Electric Stock Strike = $30.00 Expiry = 18 November 2006 Option Cost: $4.70 (1) At expiry: GE Stock is $40.00. You "exercise" your option: Buy the stock at $30.00, then sell the stock at $40.00, to make $10.00 on the exercise. Your profits are: $10.00 - $4.70 (cost of option) = $5.30 per share (2) At expiry: GE Stock is $28.00. You could buy the stock at $30, but then you'd lose $2.00 per share! Your options expire worthless, and you have lost the money you paid for the options. If the price of GE is only $34.00 today, why would you pay $4.70 for the right to buy it at $30.00? ($34.00 strike - $30.00 current price = only $4.00!) The answer is that we don't expect a stock price to remain constant over time. This is where uncertainty comes into play. Uncertainty has value. A stock price is volatile. Think about it: would you expect GE share price in a month to be exactly the same price it is today? No. So there is a good chance that the price will be above $34.00 (or below $34.00). Along these same lines, the more time there is between now and expiry, the more uncertainty there is. Therefore, time and volatility play a big role in how an option is valued. Going back to GE, we can easily see the time value reflected in the price of an option with the same strike but different expiry. The extra month of time is worth $0.30 upfront cost. Underlying = X shares of General Electric Stock Strike = $30.00 Expiry = ** 18 November 2006 ** Option Cost: $4.70 Underlying = X shares of General Electric Stock Strike = $30.00 Expiry = ** 18 December 2006 ** Option Cost: $5.00An option grants the holder the right but not the obligation to buy or sell the underlying stock at a fixed price by a fixed date.As options only cost a fraction of the price of the underlying stock, it is commonly used as a speculative leverage instrument.that you think what you think
A stock option is a right to buy?
A stock CALL option is the right to buy. A stock PUT option is the right to sell. See related links for a nice resource and articles how options work. In the Derivatives markets, a stock option or "option" is a contract to buy or sell the underlying stock at a Strike price. This agreement allows you to pay a premium for this arrangement. See more answers to such questions at http://growthmag.com .
In relation to stock options what is the strike price?
The strike price of a stock option, is a fixed price at which the owner of the stock can either buy or sell at. The strike price is a key variable in a derivatives contract between two people.
Should you take a loss with exercising stock options that are below the strike price Example is that options are worth 15.20 right now but strike price is 16?
What you should really consider is the price of the stock in relation to the strike price. If the price of the stock is now way above $16, for example, the underlying stock is $50 now, then exercising the options for the stocks would be more profitable. Otherwise, simply selling the options would be more profitable. The moneyness of the options matter more in this case.
What is 'put' trading?
Put trading means trading put options. Put options are options that are derived from stocks and it allows you to always sell the stock at the strike price before expiration no matter what price the stock is in future. As such, put options are bought when you expect the underlying stock to go DOWN.
How is it possible for an employee stock option to be valuable even if the firms stock price fails to meet shareholders expectations?
Stock options are in essence the right to buy a specified number of shares at a specified price (known as the "strike price") within a specified period of time. If at any given point the current price of a share of stock is higher than the strike price, the options have value. Both stock price and shareholder expectations tend to fluctuate, and not always in the same direction at the same time, so it's quite normal for the two to be at least temporarily out of alignment. Think of it this way. The value of the options is based on the difference between the current stock price and the strike price, while shareholder expectations are based on what shareholders collectively thought the stock should or would be worth. If a share of stock is worth more than the strike price, but less than the shareholders were expecting, it would result in the situation you describe.
Do you have to exercise incentive stock options if market price is lower than granted price?
No, and you shouldn't. If the strike price of your option is $10 per share, and the stock is currently trading at $9, exercising it would get you nine-dollar stock for $10 per share. This is what we options fans call a very bad thing.
What is the price of a ford stock option for the public?
Any stock website that gives you the price of the stock itself will have a link to the price of the options. For every stock there are many options to choose from ranging in price and date. Study Options Weekly before trading options.
What is strike price?
strike price : strike price is nothing but related maket price particular script for an underlying assets .this strike prices set by the stock exchange .............. by , sumanth choudary
How to profit buying put stock options?
Buy the right put option, meaning the correct strike price and the correct expiration date and if the stock goes down, you make money. Options Weekly has some great write ups on trading options.
Which one has great potential-call option or put option?
Call options allow you to always buy the underlying stock at its strike price before expiration no matter what price the stock is in future and is therefore bought when the underlying stock is expected to go UP. Put options allow you to always sell the underlying stock at its strike price before expiration no matter what price the stock is in future and is therefore bought when the underlying stock is expected to go DOWN. As such, which one has greater potential depends on the prevailing market condition and your general outlook on the trend of the underlying stock. Generally, call options would have more appreciation potential in a bull market and put options would have more appreciation potential in a bear market.
How do you calculate stock options?
The price of stock options depends on 5 main factors:1. strike price in relation to the prevailing price of the stock2. Dividends3. Risk free interest rate4. time to expiration5. volatilityItem 1 determines the intrinsic value while the other 4 items determines the extrinsic value. Intrinsic value + extrinsic value = price of an option.
What happen if spot price remains above spot price in call option in stock?
If the spot price of the stock exceeds the "strike price" in the call option, the option is in-the-money and you can exercise it. But if you have a choice, wait to exercise it until the stock's spot price exceeds the strike price enough to cover the premium. Example: the strike price is $40 and the premium was $2. In order to make money on this option, the stock price needs to be over $42--enough to pay for the stock and replace the money you spent buying the option.
Is there a place to screen for stock options that are bought at the ask price?
All stock options are bought at the ask price. There is no such thing as buying at bid price unless you are a market maker bidding for options in the open market.
