The OCC option symbol can consist of up to 4 parts:
- Root symbol of the underlying stock or ETF, filled with spaces of up to 6 characters
- Strike price, like price x 1000, front padded 0 to 8 digits
- Expiration date, 6 digits in YY / MM / DD format
- Option type, either P or C, for sale or call
- AAPL: AAPL210723C145 – This symbol represents a call to Apple, expiring July 23, 2021, with an exercise price of $ 145.
- AMZN: AMZN210917P3700 – This symbol represents a put on Amazon, expiring September 17, 2021, with a strike price of $ 3,700.
Buy an option
If you have an option, you do not have to buy the underlying instrument; when you buy a call option, you have the right to BUY shares at the strike price of your option. You can also sell the option itself before expiration.
Likewise, when you buy a put option, you have the right to SELL stocks at the strike price of your option by exercising it, but like call options, you can also sell the sales contract before the exercise. ‘expiry.
Sell an option
First, you can sell an option in which you don’t own any shares! However, if you sell a call option, you are obligated to deliver the underlying asset at the strike price at which the call option was sold if the buyer exercises their right to take delivery. If they don’t exercise, you keep the premium for which you sold the option. Put options are the other way around, if you sell a put option you are obligated to buy the underlying asset if you exercise it.
To sell means to credit and to buy means to debit
Options on PURCHASE are purchased at a DEBIT to the buyer and should be treated as assets. So when you buy an option, the money is debited from your brokerage account. It’s just like buying a stock.
As mentioned above, you can also sell an option, without owning the shares. Options once SOLD are sold on CREDIT to the seller. When you sell an option, it should be considered a liability and money is added to the brokerage account at the time of the sale. Not much is guaranteed in the market, but it is. However, you cannot withdraw this money until the transaction has been closed. This money is generally used to make up the margin required for writing options.
Every day on Options trading signals our resident specialist, Neil Szczepanski, performs defined risk operations that protect us from black swan events 24/7. Many may think that this is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours a day. Therefore, a stop loss only protects you for 1/3 of each day. Actions can go up or down. With options, you are always protected because we define the risk in a spread. We cover with multiple tabs which are still in place once you own it.
My team and I have been building and developing fully systematic algorithmic trading strategies for many years and can tell you unless you have a solid foundation for when and where there are opportunities in market trends. , you are probably going to spend your money. failed exchanges. Although I have already completed the first live presentation, I will be hosting another one at July Wealth365 Summit July 16 at 12 p.m. The Summit is free and offers unprecedented learning opportunities… plus a potential prize or two!
Have a nice day!
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Founder and Chief Market Strategist