When there is a surge in demand for a specific options contract, it will often cause the premium to to rise and this is sometimes called a “volatility rush”. As the premiums get jacked up, the options become expensive or rich.

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Have you ever thought about trading the Dow Jones Industrial Average? Two of the more popular ways of trading the 113-year old average: 1) the Dow Jones DIAMONDS, symbol DIA and 2) the Dow Jones Industrial Index, .DJX. Both are (register to read more …) [...]

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A strangle is an options strategy that includes the purchase (or sale) of both puts and calls. Like the straddle, both the puts and calls have the same expiration date. However, unlike the staddle, which includes puts and calls (register to read more …) [...]

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If an options contract is an agreement between two parties, what happens if the other side of the contract fails to honor their obligation. After all, bad things sometimes happen and, if an investor opens an options contract, the other (register to read more …) [...]

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While volume in the stock market refers to the number of shares changing hands, options volume is the number of contracts traded during a given period of time. For example, the volume in General Motors (GM) today was 672,000 contracts. (register to read more …) [...]

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A straddle is an options strategy that includes the purchase (or sale) of both puts and calls with the same strike price and the same expiration date. For example, if Wells Fargo (WFC) is trading for $25 and I buy (register to read more …) [...]

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In the world of investing, suitability is generally associated with a brokerage firm’s responsibility to ensure that clients are making good decisions and investing within their needs and objectives. For example, if a broker recommends that Aunt Mildred buy 1,000 (register to read more …) [...]

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Buying shares and buying puts is known as the Protective Put strategy. Basically, the investor is buying puts to protect a stock from a move to the downside. In most cases, the strategist buys 1 put for every 100 shares. (register to read more …) [...]

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The multiplier is the numerical value used to determine the total premium for an options contract. Listed stock, ETF, and index options have a multiplier of 100. Therefore, if an option is quoted at $4.00 a contract, it costs $400.00 (register to read more …) [...]

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Time value is the value of an options contract beyond its true or intrinsic value. It is also known as extrinsic value. For example, if Apple Computer (AAPL) trades at $126.00 per share, the June $125 call has $1 of (register to read more …) [...]

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