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41. Unusual Options Volume & Other Clues in - The Stock Replacement Covered Call Strategy
42. Glossary
43. Tax Deferral Strategies
44. Tax Deferral Strategies - Sell a call option
45. Tax Deferral Strategies - Several different scenarios
46. WHY DO YOU NEED - THE AMAZING STOCK REPAIR STRATEGY
47. Introducing The Amazing Stock Repair Strategy
48. How the options react in three different scenarios: up, down, and stagnant.
49. Profit and loss chart showing how this Stock Repair Strategy works at different stock price levels
50. Time / Diagonal Spreads
Options Article 1 |
Options Article 2 |
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Options Article 4
Options Article 5 |
Options Article 6 |
Options Article 7 |
Options Article 8
Options Article 9 |
Options Article 10
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Featured Article:
Difference between In-the-money (ITM), out-of-the-money (OTM),
or at-the-money (ATM)
An option can be described by its strike price’s proximity to the
stock’s price. An option can either be in-the-money (ITM),
out-of-the-money (OTM), or at-the-money (ATM).
An at-the-money option is described as an option whose exercise or
strike price is approximately equal to the present price of the
underlying stock.
For instance, if Microsoft (MSFT) was trading at $65.00, then the
January $65.00 call would an example of an at-the-money call option.
Similarly, the January $65.00 put would be an example of an
at-the-money put option.
Please view charts below for at-the-money option examples.
MSFT CALLS Stock = $65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 15.10 ITM 15.00 .10
55 10.30 ITM 10.00 .30
60 5.70 ITM 5.00 .70
65 1.50 ATM 0 1.50
70 .75 OTM 0 .75
75 .35 OTM 0 .35
80 .15 OTM 0 .15
MSFT PUTS Stock = $65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 .10 OTM 0 .10
55 .30 OTM 0 .30
60 .70 OTM 0 .70
65 1.50 ATM 0 1.50
70 5.70 ITM 5.00 .70
75 10.30 ITM 10.00 .30
80 15.10 ITM 15.00 .10
An in-the-money call option is described as a call whose strike
(exercise) price is lower than the present price of the underlying.
An in-the-money put is a put whose strike (exercise) price is higher
than the present price of the underlying, i.e. an option which could
be exercised immediately for a cash credit should the option buyer
wish to exercise the option.
In our Microsoft example above, an in-the-money call option would be
any listed call option with a strike price below $65.00 (the price
of the stock). So, the MSFT January 60 call option would be an
example of an in-the-money call.
The reason is that at any time prior to the expiration date, you
could exercise the option and profit from the difference in value:
in this case $5.00 ($65.00 stock price - $60.00 call option strike
price = $5.00 of intrinsic value). In other words, the option is
$5.00 “in-the-money.”
Using our Microsoft example, an in-the-money put option would be any
listed put option with a strike price above $65.00 (the price of the
stock). The MSFT January 70 put option would be an example of an
in-the-money put.
It is in-the-money because at any time prior to the expiration date,
you could exercise the option and profit from the difference in
value: in this case $5.00 ($70.00 put option strike price - $65.00
stock price = $5.00 of intrinsic value. In other words, the option
is $5.00 “in-the-money.”
Please view charts below for more in-the-money option examples.
MSFT CALLS Stock =$ 65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 15.10 ITM 15.00 .10
55 10.30 ITM 10.00 .30
60 5.70 ITM 5.00 .70
65 1.50 ATM 0 1.50
70 .75 OTM 0 .75
75 .35 OTM 0 .35
80 .15 OTM 0 .15
MSFT PUTS Stock = $65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 .10 OTM 0 .10
55 .30 OTM 0 .30
60 .70 OTM 0 .70
65 1.50 ATM 0 1.50
70 5.70 ITM 5.00 .70
75 10.30 ITM 10.00 .30
80 15.10 ITM 15.00 .10
An out-of-the-money call is described as a call whose exercise price
(strike price) is higher than the present price of the underlying.
Thus, an out-of-the-money call option’s entire premium consists of
only extrinsic value.
There is no intrinsic value in an out-of-the-money call because the
option’s strike price is higher than the current stock price. For
example, if you chose to exercise the MSFT January 70 call while the
stock was trading at $65.00, you would essentially be choosing to
buy the stock for $70.00 when the stock is trading at $65.00 in the
open market. This action would result in a $5.00 loss. Obviously,
you wouldn’t do that.
An out-of-the-money put has an exercise price that is lower than the
present price of the underlying. Thus, an out-of-the-money put
option’s entire premium consists of only extrinsic value.
There is no intrinsic value in an out-of-the-money put because the
option’s strike price is lower than the current stock price. For
example, if you chose to exercise the MSFT January 60 put while the
stock was trading at$65.00, you would be choosing to sell the stock
at $60.00 when the stock is trading at $65.00 in the open market.
This action would result in a $5.00 loss. Obviously, you would not
want to do that.
Please view charts below for out-of-the-money option examples.
MSFT CALLS Stock = $65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 15.10 ITM 15.00 .10
55 10.30 ITM 10.00 .30
60 5.70 ITM 5.00 .70
65 1.50 ATM 0 1.50
70 .75 OTM 0 .75
75 .35 OTM 0 .35
80 .15 OTM 0 .15
MSFT PUTS Stock = $65.00
Strike Price Option Price Status Intrinsic Value Extrinsic Value
50 .10 OTM 0 .10
55 .30 OTM 0 .30
60 .70 OTM 0 .70
65 1.50 ATM 0 1.50
70 5.70 ITM 5.00 .70
75 10.30 ITM 10.00 .30
80 15.10 ITM 15.00 .10
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