Option buying provides traders with the capability of adapting to various functions and methods to monetize on market fluctuations while minimizing potential losses. However, to expand this strategy, one must have the whole knowledge of the share market and implement reliable techniques. In this article, we look into some reliable strategies for successful option buying.
There are two types of options:
Call options: Assign the right to purchase the underlying asset at a predetermined price to the holder.
Put options: Provide the holder with the option to sell the underlying asset for a predetermined amount.
Key Terms:
Strike Price: The price at which an asset is available for purchase or sale.
Expiration Date: The deadline by which an option must be used before it expires and loses value.
Premium: The amount needed to buy the option.
In-the-Money (ITM): When an option has intrinsic value, it is said to be In-the-Money (ITM) (e.g., a call option where the asset price is above the strike price).
Out-of-the-money (OTM): A call option in which the asset price is less than the strike price is considered to be out-of-the-money (OTM) if the option has no intrinsic value.
At-the-money (ATM): When the strike price and asset price are equal, it is known as at-the-money (ATM) trading.
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