It’s a form of derivative contract that gives buyers of the contracts the right
(but not the obligation) to buy or sell a security at a chosen price at some
point in the future. Same as we trade Futures in our mercantile exchange
just with different terms.
The amount blocked as premium in options trading is the total amount that
investors pay for an option, In option trading Our X amount is blocked by
the broker named as Premium.
If we think the price of instrument will go up than its CALL
If we think it will be down, then we will buy PUT option similar criteria
just different terminologies.
One of the strategies used is Martingale in which you average out based on
different technical levels.
Strike Price : Price where option can be traded we can in forex as current
price
Scenario for (CALL OPTION) :
ITM -IN the money - sort of Previous price level on support in forex we
analyze it as previous low or rejecting candle.
OTM -out of money – Forecasted levels.
ATM – At the money - it’s the previous price level on resistance.
Deep OTM also similar with further above levels
In PUT OPTION
Just the reverse of above scenario
Time Value – Difference between an option’s price and its intrinsic value
Expiration date: The date on which an option contract expires.
Intrinsic value: The value of an option if it were exercised immediately.
Straddle term we usually name it as Hedging kind of neutral strategy but
there are different tactics used to make profit from this hedging such as
short scalps within high volatile market.
I started last night testing my trading strategies in OPTIONS and the result
is in front of you.
Made $494 after net losses.
I barely used fund so when its proper account obviously there will be
proper risk management or wallet management, we call it here.