Cryptocurrencies
Options trading examples
To show how options trading works, let s walk through a couple of scenarios.
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Call option example
Let s say you buy a call option for Big Tech Company with a strike price of $500 and an expiration date of a month from now. The lower this strike price is in relation to the Big Tech Company s current price, the higher the premium you ll have to pay.
Let s say your premium is $10 per share, and the options contract is for the standard 100 shares. This means you ll have to pay a total premium of $1,000 for the option. However, if shares in the Big Tech Company rise to, say, $600 before the expiration date, you ll make a profit of $100 per share, or $10,000 in total (minus the $1,000 premium).
How Options Trading Could Be Fueling a Stock Market Bubble
A swell of individual investors are betting that stocks will go up. That enthusiasm is having a growing influence over the regular stock market itself.
People waiting to receive the coronavirus vaccine in Queens this month. Optimism about vaccines may be lifting the market.Credit.Hiroko Masuike/The New York Times
Published Jan. 25, 2021Updated Jan. 26, 2021
The stock market is near record highs, and optimism abounds. Coronavirus vaccines are finally being jabbed into arms. Interest rates are at historic lows. And the Democrats who control Washington are expected to pour another trillion dollars or so into the still-struggling economy.
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Trading volume in U.S. equity options hit a new record on Friday, according to data from options analytics provider Trade Alert. More than 49.5 million contracts traded during the session, Trade Alert said. Friday marked the expiration of monthly options contracts, which often results in heavier-than-usual volume. This year, some 416 million U.S. equity options .