Learn to Trade Options

Learn How to Trade Options

When you learn how to trade options, it is critical for an options trader to understand option strike prices. Option strike prices are the prices in which the option holder has the right to buy or sell the underlying depending on if the option is a call or put. As an example if the owner of an option has a call option with a strike price of $50, he has the right to buy the shares for $50 until expiration. A call option gives the owner the right buy shares.

To understand option strike prices, is critical and should be one of the first things taught whe a trader wants to learn how to trade options. For calls, if the stock price is above the option strike price, the call is in-the-money (ITM). If the stock and the option strike price are close, the call is at-the-money (ATM). If the stock price is below the option strike price the call is out-of-money (OTM). This relationship is just the opposite for puts but the ATM is basically the same for a call or put.

Another point when learning how to trade options is to understand "moneyness". Moneyness describes the degree to which option strike prices are in or out-of-the-money. Simply put, the more the options strike price is in-the-money, the closer the delta is to 1.00. The more the options strike price is out-of-the-money the closer the delta is to zero.

To learn how option strike prices may affect your options trading, traders should contact an options mentor with professional trading experience that can help you understand the nuances.
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At The Money Options Trading