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Deep out of the money put option explained


Deep out of the money put option explained


This phrase applies to both calls and puts. Please help to improve this article by introducing more precise citations. (April 2009) ( Learn how and when to remove this template message)In finance, moneyness is the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. Moneyness is firstly a three-fold classification: if the derivative would make money if it were to expire today, it is said to be in the money, while if it would not make money it is said to be out of the money, and if the current price and strike price are equal, it is said to be at the money.

If it still out of the money at expiry, the option will expire worthless. This is a limited time offer. You May Also Like Continue ReadPicture yourself driving a car.If you drive down the highway at 95 miles an hour, you are going to get to your destination in a hurry. However, there are two major drawbacks: 1. There is a higher chance that you will be in an accident and 2. If you do have an accident, there is a higher chance you will get hurt.If you drive down the highway at 40 miles an hour, you will have to wait longer to arrive at your destination.

However, there is less of a chance of an accident and if you do have an accident, it will probably involve less damage to yourself or your vehicle than if you were traveling at 95 miles per hour.The same holds true for selling options.It is a common fallacy among option traders that in selling options, one must concentrate on options with 30 days or less remaining until expiration.

The logic goes that as this is when options experience the fastest rate of time decay, why.




Deep out of the money put option explained

Option out put the money explained of deep

Option out put the money explained of deep