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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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