optionsstrike.com

Options Trading Explained

Complete guide to calls, puts, strike price, expiration, open interest, time decay and Greeks

What is Options Trading?

Options trading allows traders to buy or sell contracts based on an underlying asset without owning it directly.

Each contract includes key components such as strike price, expiration date and time value.

Call Options vs Put Options

Call Options

Right to buy an asset at a fixed strike price. Used in bullish scenarios.

Put Options

Right to sell an asset at a fixed strike price. Used in bearish scenarios.

Understanding the difference between call and put options is fundamental in options trading strategies.

Strike Price Meaning

The strike price is the level where an option can be exercised. It plays a key role in determining profitability.

Options Expiration Date

The expiration date is when the contract becomes invalid. As expiration approaches, time value decreases significantly.

Open Interest Meaning

Open interest represents the number of active contracts. High open interest indicates strong participation and liquidity.

Time Decay (Theta)

Time decay reduces an option’s value as expiration approaches. This effect accelerates in the final days.

Moneyness (ITM, ATM, OTM)

ITM Has intrinsic value.

ATM Equal to market price.

OTM No intrinsic value.

The Greeks

Delta: Price sensitivity.

Gamma: Change of Delta.

Theta: Time decay.

Vega: Volatility impact.

Rho: Interest rate sensitivity.