Credit scores play an important role in our lives. Whenever you apply for things like a credit card or a mortgage, a credit score will be part of the decision making process. Many people might think of a credit score as a single number, but there are actually two main credit scoring companies in the … Read more
An option spread is a term for any combination of long and short options for the same underlying asset, but with different strike prices and sometimes even different expiration dates between both the long and short options. Each option within an option spread is typically referred to as a leg of the spread. So an … Read more
The moneyness of an option refers to the relation between the strike price of an option and the current price of the underlying asset. There are three related terms. The three terms are “in the money”, “out of the money”, and “at the money”. They’re often abbreviated as “ITM”, “OTM”, and “ATM”. What does “in … Read more
What is a Put Option? A put option is a financial contract that gives the option buyer the right, but not the obligation, to sell an asset at a pre-determined price within a pre-determined time frame. These are called “put” options because they represent the right to put the asset up for sale. Put options … Read more
What is a Call Option? A call option is a financial contract that provides the option buyer the right, but not the obligation, to buy an asset at a selected price within a selected time frame. These are called “call” options because they represent the right to “call” for the asset. Call options are financial … Read more
Despite their names, American and European style options don’t have anything to do with regions or locations. They are simply different types of option exercise. American style options can be exercised at any time before the option expiration date while European style options can only be exercised at the option expiration date. You’ll find that … Read more
Contracts exist in our everyday lives. For example, you sign a contract when you buy a new car. There’s also one when you sign up for a new phone plan. What if I told you that some people sign contracts to buy stocks? This might sound a bit strange, but that’s exactly what options and … Read more