option noob

Discussion in 'Options' started by RichKid, Jul 15, 2011.

  1. RichKid


    Hi guys I really tired to understand how work option I guess here you can help me

    I have few question, if my question would be wrong please forgive me and put me on the right way


    1. On option market prices always similar like in future market ?

    2. If WTI trade right now on 97.26 I think for example crude can go down sooo I need to do next: (putt 97.26 and if crude will get down at 97 my position still 97.26) I need to close it soo what is my profit and how many can i get for 2k or 3k option contracts ?

    3. Usually options tied to futures in trading platform or I need to open one more acc ?

    Thank you for your attention and excuse for my English )
  2. RichKid


    wow no answers in so volatility forum what happening maybe I have bad questions ? :confused:
  3. download thinkorswim's papermoney platform, will answer all your questions once you play around with it.
  4. RichKid


    I already have it, where I can find options
  5. Click Help tab, click 'thinkdesktop user manual'
  6. RichKid


    Thank you I find that and how I see for example /cl (crude oil) have no clear prices how to understand that 98.50 but price is 98.68 I need sell call option and then if price will touch 98 50 I will fix my profit ?
  7. Read an options textbook...
  8. Lucias


    3. Usually options tied to futures in trading platform or I need to open one more acc ?

    Depends on brokers. Some brokers use the options on futures with futures account. Others offers options on futures as part of the equities/options accounts.

    You should call your broker and ask how they do it. I believe ThinkOrSwim offers options on futures from the futures accounts.

    The other questions can be answered by playing with the software.
  9. RichKid


    yeh it just one more knowledge that i put in my basket
  10. one of the best books is macmillan on options.
    crude oil option strikes are in 50 cent increments so that 96.50 is strike price, 96.68 is futures price.
    you can download option trading workbook from

    you should plug in strike prices, future price (also known as underlying), implied volatility, days remaining to option expiry, interest rate and this spreadsheet will calculate theoretical option price (premium). sample value for implied volatility of CL can be 30%

    9850 put means you have the right to sell crude at 98.50 even it is say 78.50 usd. assume you paid 2000 usd to buy this right.
    if crude is 78.50, your profit will be 18000 usd which is calculated as 9850-7850 -2000.
    if crude is more than 9850 at expiry, your loss will be 2000 (premium you have paid)
    #10     Jul 20, 2011