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Options explained

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Category: Beginners Guide

 Bid (pts): The "bid" price is the most recent price provided by a market maker to buy a selected option. What this means is that in case you enter a "market order" to sell the March 2010, 125 name, you'd sell it at the bid price of $3.40.

 Ask (pts): The "ask" price is the most recent worth provided by a market maker to sell a selected option. What this means is that when you enter a "market order" to buy the March 2010, one hundred twenty five name, you would purchase it at the ask price of $3.50.

NOTE: Shopping for on the bid and promoting on the ask is how market makers make their living. It is imperative for an choice trader to consider the difference between the bid and ask worth when considering any choice trade. The extra energetic the option, typically the tighter the bid/ask spread. A wide unfold could be problematic for any trader, particularly a short-time period trader. If the bid is $3.40 and the ask is $3.50, the implication is that in case you purchased the option one second (at $3.50 ask) and rotated and offered it an prompt later (at $3.40 bid), even though the worth of the option didn't change, you'd lose -2.85% on the commerce ((3.forty-3.50)/3.50

 Extrinsic Bid/Ask (pts): This column displays the amount of time premium built into the worth of every option (on this example there are two prices, one based on the bid price and the other on the ask value). This is essential to note as a result of all options lose all of their time premium by the point of option expiration. So this worth displays the whole period of time premium presently built into the worth of the option.
U.S. Government Required Disclaimer - Commodity Futures Trading Commission

Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN. All trades, patterns, charts, systems, etc., discussed in this advertisement and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher or Tradewins.