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xrust:

"Keep talking" (Carlson)

You come into my office and place a bet and you become an option buyer. You cannot lose more than the value of an option (bet), but if the outcome of the battle (the auction on which you place your bet) is favourable to you, you make the difference between the price of your bet and the price of the auction of course, according to the number of tickets purchased (volume).


That's not the way it works. You'll need more details and examples.

Please do not google the forest )

 

Now for the zesting : suppose I set up a betting grid from $50 to $500 in $50 increments - these will be the strike prices of the options. The current path price will be $201 according to the last offered price :).

You can place bids at any price according to the grid, either rising or falling (Call \ Put), and because my business is not regulated by any regulator you can buy options of both types simultaneously (but about this later).

Call options which are above the current price and Put options which are below are in the money (in the money), because they are in the money zone and make a profit (conditional).

Those options that are in the loss zone (not yet) are called out-of-the-money options and the further away from the current price the lower the value of the contract (because it is less likely that the price will go down \ to that level).

 

In terms of time, the closer the expiry date, the lower the value of the contracts, as there is less chance of the price reaching a profitable level

 
I'll fill in the rest in the evening, but if you have any questions, please ask.
 
xrust:
I'll finish the rest in the evening, but if you have any questions, please ask.

I need examples with pictures
 
xrust:
You can bet on either a higher price (Coll option) or a lower price (Put option)

Coll comes in aspen.

And the option isCAll.

 
paukas:

Coll comes in aspen.

And the option isCAll


Don't pick on me - already corrected
 
paukas:

Coll comes in aspen.

And the option isCAll



The man with the beard. Don't... don't piss me off.
 
Mischek:

The man with the beard. Don't... Don't piss me off.

blue-nose bear, don't interfere, it's probably a good info if a man with a beard is watching the topic.

;)

Rustam, I understand the whole "trick with options" is to predict the time? what prevents me from setting an unrealistic price at the end of the option expiry? i.e. i make a prediction that the eu will pass 2 000 pips in a week, which on historical data is very rare, and that i will be in profit all the time?

 
The trick with options is that an option is the right to trade at a certain time (European type (vanilla)), or up to a certain point (American type) at a price you predict, which you can walk away from if you are not happy with that price.