💎 In March, get 5 (FIVE!) free stocks valued up to $9600 when you fund an account with WeBull! – https://act.webull.com/k/CfaJLUrdC3v2/main
💎 Automate your investments and take charge of your money with M1 Finance! –
https://m1finance.8bxp97.net/e4vr5X
💎 Sign up for Robinhood and get a free stock, like Visa, Microsoft, or Apple! – https://robinhood.c3me6x.net/rjg4j
💰 Follow My Trades on the mobile app, Iris https://invite.iris.finance/share/inthemoney
(Username @inthemoney)
💰 Support the channel: https://www.patreon.com/inthemoney
💰Discord: https://discord.gg/Ye5Uvft
All promotions apply to the time the video is posted but may change and become irrelevant in the future. This description will not be updated to reflect this, check the newest video for the most up-to-date promotions.
You should not treat any opinion expressed on this YouTube channel as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.
—————————————————————————————————————————————
Questions and Answers (Full set here, SELECT “FILE” then “MAKE A COPY” if you want to edit it: https://bit.ly/3hDQMXw)
Section: Basics of Calls
1. What does a call option give you the right to do?
Call options give you the right to buy 100 shares of the underlying stock at a certain share price known as the “strike price”
2. What is Premium?
Premium is the amount PER SHARE that you pay for the option. When I say per share, I mean per share of the 100 shares that the contract controls. In other words, it’s the premium you pay for the right to buy each share at the strike price when exercise the option.
3. Define ITM, ATM, and OTM for Calls
ITM: A call option whose strike price is less than the current share price of the underlying. If you exercises, you would extract some monetary value.
ATM: A call option whose strike price is equal to the current share price of the underlying. You would not lose or gain value by exercising.
OTM: A call option whose strike price is greater than the current share price of the underlying. You would certainly lose money by exercising.
4. Define “Underlying”
The stock on which a certain set of options are traded. In other words, the
stock from which options strike prices and premiums are derived.
5.Should you typically exercise?
No, the circumstances in which exercising is justified are rare. They are
more commonplace in strategies like credit or debit spreads, but not all
that common with trading individual options.
Section: Premium
1. Difference between Extrinsic and intrinsic value
Extrinsic value is the portion of the option’s premium given to the option based on days til expiration (DTE) and Implied Volatility. With more days left before expiration, the option has the chance to get deeper in the money (ITM), building up non-decayable Intrinsic Value. With more anticipated volatility, the deeper ITM the option might get. These two things work together; each one is useless without the other. Options are more expensive with more of each factor because they are both good for options, and this must be priced in.
Intrinsic Value is the portion of the premium given to the option that amounts to whatever you can exercise it for. If your option is $1.00 ITM, you could exercise it and extract $1.00 of value per share of those 100 shares you buy when exercising a call. So, that option’s premium, its price, will have $1.00 tacked onto it because this is what you’d get by exercising (remember, with premium that means $1.00 per share of the 100 shares the contract controls. So in real dollar value, it’s $100).
These two values explain premium in it’s entirety. Nothing else is a contributing factor, although outside influences affect how each portion of the premium changes.
2. How does time until expiration affect the premium of an option
Rest of the questions & answers: https://bit.ly/3hDQMXw
00:00 Intro & Housekeeping
4:17 Basics of Calls
21:37 Premium
35:11 Why Exercising=Dumb
44:38 Break-Even
01:01:58 Implied Volatility
01:16:00 The Greeks
01:34:29 Bid-Ask & Liquidity
01:47:14 Difference Between Puts & Calls
02:02:56 ITM vs OTM Analysis
02:12:58 Real Trade