A mathematical formula for determining an option's premium. The Black-Scholes model can be applied to compute the theoretical value for an option using the current trading price of the underlying security, the strike price of the option, the time to expiration, the expected dividends, the expected interest rates and the implied volatility. The Black-Scholes model is not 100% accurate but it is widely used today to calculate theoretical prices. It is also used to calculate the implied volatility of an option.

Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results....[Read on...]

If you are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that it is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at a discount....[Read on...]

Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time.....[Read on...]

If you are investing the Peter Lynch style, trying to predict the next multi-bagger, then you would want to find out more about LEAPSÂ® and why I consider them to be a great option for investing in the next MicrosoftÂ®.... [Read on...]

Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date....[Read on...]

As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding the underlying stock in the covered call strategy, the alternative....[Read on...]

Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date....[Read on...]

To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin....[Read on...]

Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading.... [Read on...]

Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator.... [Read on...]

Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in 1969. It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa.... [Read on...]

In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions. They are known as "the greeks".... [Read on...]

Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow.... [Read on...]

Introduction
Call Option
Put Option
Strike Price
Option Premium
Moneyness
Expiration
Exercise & Assignment
Getting Started in Options Trading
Finding an Options Broker
Options Chain
Order Entry
Options Transactions
Types of Orders
Margin Requirements
Glossary

Futures Basics
Futures Contract Specs
Futures Margin
Long Futures Position
Short Futures Position
Long Hedge
Short Hedge
Understanding Basis

Call Buying
Bull Call Spread
The Collar
Call Backspread
Bull Calendar Spread
Covered Calls
Naked Puts
Covered Straddle

Ratio Spread
The Straddle
The Strangle
The Butterfly
The Condor
The Iron Butterfly
The Iron Condor
Calendar Straddle

Overview
Synthetic Long Call
Synthetic Long Put
Synthetic Long Stock
Synthetic Short Call
Synthetic Short Put
Synthetic Short Stock

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