BASIC options questions

Discussion in 'Strategy Development' started by FaderTrader, Mar 29, 2006.

  1. Forgive me for these very basic questions as I have very little knowledge of options. Could someone please answer the following for me:

    1. At-the-money options: Is this defined as all options above the strike or is there a limit? Say, the stock trades at 50, are options struck at 5 considered at-the-money or simply in-the-money (can you explain the difference)? What's the precise definition of at-the-money?

    2. How can I find the IV for at-the-money options - does esignal offer this on some sort of quote sheet? I use esignal, but have never bothered to look it up (just trying to save myself an hour here).

  2. (1) If a stock is trading at $50, the $50 calls and $50 puts are at-the-money. The call strike prices above $50 are out-of the money. The call strike prices below $50 are in-the-money. Vice versa with the puts. (2) If the stock is trading at $51 and the nearest strike prices are $50 and $52, generally the $52 calls and $50 puts are thought of as being at-the-money.
  3. if you want tom really learn about options - go to think or swim - they are not only great for execution, and their software which gives you the proper delta's gamma's etc - but also for te4aching one how to trade options