The Strike Price
The strike price is the price of a stock or other equity specified in options contracts . The strike price is the price at which a contract in options trading will be delivered should the buyer choose to execute it. The strike price will be the price of satisfaction of the options contract no matter what the market price, also called the spot price , is at the time. Specifically, it is the price at which owner of options can buy stock in case of a call option or sell stock in the case of a put option. The strike price of an options contract is also referred to as the exercise price. When trading options on stocks the trader carries out the same types of fundamental and technical analysis that he would when buying stocks or selling stocks directly. He will use Candlestick analysis to gauge market sentiment and assess a stock’s margin of safety and intrinsic stock value in order to have a clear view of the stock’s eventual value.
Using Candlestick patterns as a guide, traders in the options markets seek to anticipate if stocks are likely rise above the strike price of available options contracts or are likely to fall below the strike price. If the trader anticipates a rise in stock price above the strike price he will seek to profit by buying calls on the stock at given strike price. If he expects the stock price to fall he will seek to profit by buying puts. Buying calls gives the trader the right to buy stock and buying puts gives the trader the right to sell stock, in each case at the strike price specified in the contract. In neither case of buying options does the buyer have an obligation to buy or sell. It is the seller of puts or calls who gains premiums for taking on the risk of unanticipated, by him, changes in stock prices .
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The strike price will be the price of
satisfaction of the options contract no
matter what the market price, also
called the spot price , is at the time.
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When trading options on stocks the
trader carries out the same types of
fundamental and technical analysis
that he would when buying stocks or
selling stocks directly.
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He will use Candlestick analysis to
gauge market sentiment and assess a
stock’s margin of safety and intrinsic
stock value in order to have a clear
view of the stock’s eventual value.
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Using Candlestick patterns as a guide,
traders in the options markets seek to
anticipate if stocks are likely rise
above the strike price of available
options contracts or are likely to fall
below the strike price.
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If the trader anticipates a rise in stock
price above the strike price he will
seek to profit by buying calls on the
stock at given strike price.
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Buying calls gives the trader the right
to buy stock and buying puts gives the
trader the right to sell stock, in each
case at the strike price specified in the
contract.
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It is the seller of puts or calls who
gains premiums for taking on the risk
of unanticipated, by him, changes in
stock prices.
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The time value is what the market
consensus assigns a stock based upon
expected price movement between the
current date and the contract
expiration date.
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They always have the potential when
coupled with Candlestick trading
tactics to lead to short term profits in
trading options on stocks or other
equities.