Option Premium | Options Trading Concepts

Option premium is made up of both intrinsic and extrinsic value, and is the price that the option is trading for. Learn how premium is affected in this episode, and how buyers and sellers can make the most of this! New to options trading? Mike breaks down trading strategies and concepts in a visual way for beginner to intermediate investors. Click the link below to learn more: http://ow.ly/Y0Aim Follow: @doughTraderMike Use the hashtag #whiteboard to discover more options trading concepts! ======== tastytrade.com ======== Finally a financial network for traders, built by traders. Hosted by Tom Sosnoff and Tony Battista, tastytrade is a real financial network with 8 hours of live programming five days a week during market hours. From pop culture to advanced investment strategies, tastytrade has a broad spectrum of content for viewers of all kinds! Tune in and learn how to trade options successfully and make the most of your investments! Watch tastytrade LIVE daily Monday-Friday 7am-3:30pmCT: http://ow.ly/EbzUU Subscribe to our YouTube channel: https://www.youtube.com/user/tastytrade1?sub_confirmation=1 Follow tastytrade: Twitter: https://twitter.com/tastytrade Facebook: https://www.facebook.com/tastytrade LinkedIn: http://www.linkedin.com/company/tastytrade Instagram: http://instagram.com/tastytrade Pinterest: http://www.pinterest.com/tastytrade/

Comments

1. hey mike, say this monday I buy a GDX call for may 2017 strike price is $24. if gdx keeps rising from here am I guaranteed to make money via a rising premium? since a rising stock price means less risk thus a higher premium? would it then make sense to sell the contact to someone else and pocket the difference in premium or hold til expiration and exercise? this is a hypothetical scenario that the option will expire ITM. If I don't have the money to pay for the shares if I were to exercise the call could I just sell the contract to someone else easily?
2. hey I have one doubt why it is said that otm options have "0" value at expiration. suppose stock price is 80 I but otm call option at 85.. stock is valued at 90 at expiration ..so I will still make 5 -option premium I paid as profit... right??
3. Hey Mike. This was a good video. You broke down ITM and OTM nicely as well as given me a good understanding of how premium is calculated. Your explanation on IV was not quite clear to me. As I understand it is just how volatile a stock is or better the stock price's propensity to change and by how much. High IV means the price can move farther from where it is while a low IV increases the likelihood of the price to stay closer to where it is. High IVs correlate to high premiums. I know this, I just do not really know why.
   
   Time is money. I get this. The more time an option has on it the more extrinsic value is tied to the price. So in summary, it seems like selling options with more extrinsic value is better than selling ones with less.
4. Great video !