Like equity options, index options allow an investor to capitalize on an expected market move or to protect holdings in the underlying instruments. The underlying instruments of index options are indexes. These indexes reflect the characteristics of either the broad equity market as a whole or specific industry sectors within the marketplace.
Take an in-depth look at some of the more commonly used Greeks. We hope to show investors how premium changes are expressed using Greeks, how the Greeks are interrelated and how results are always changing during market hours.
Volatility can be a very important factor in deciding what kind of options to buy or sell. Volatility reflects the range that a stock’s price has fluctuated in a certain period.
Put/call parity is a captivating, noticeable reality in the options markets. Put/call parity helps investors understand some mechanics that professional traders use to value options. This includes how supply and demand impacts option prices and how all option values (at all the available strikes and expirations) on the same underlying security are related.
The Black-Scholes formula was the first widely used model for option pricing. Strategists can use this formula to calculate a theoretical value for an option using current stock prices, expected dividends, the option’s strike price, expected interest rates, time to expiration and expected stock volatility.
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Content licensed from the Options Industry Council is intended to educate investors about U.S. exchange-listed options issued by The Options Clearing Corporation, and shall not be construed as furnishing investment advice or being a recommendation, solicitation or offer to buy or sell ant option or any other security. Options involve risk and are not suitable for all investors.