In option trading what is open interest - South African Futures Exchange - MarketsWiki, A Commonwealth of Market Knowledge
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West Tradlng in India, 2 Test Series, Latest News Business News. The following table demonstrates the impact on the prices of call and put options, if any of the key factors moves higher:.
When selling options, however, a trader receives the premium upfront into his cash balance, but is exposed to potentially unlimited losses if the market moves against the position, much like the losing side of a spot trade.
To limit this risk, traders can use stoploss orders on options, just like with spot trades.
Alternatively, a trader can buy an option further out of the money, thus completely limiting his potential exposure. When buying options there is limited risk; the most that can be lost is what was spent on the premium.
If selling options — a great way to generate income — the opeb acts like an insurance company, offering someone else protection on the position. The premium is collected, and if the market reacts according to the speculation, the trader keeps the profits he made from taking that risk.
If wrong, it is not much different than being wrong on a regular spot trade.
In either case, the trader is exposed to unlimited downside, and therefore can close out the position with stoploss orders, for examplebut with options the trader will have earned the premium, a real advantage vs spot trading. The trader speculates it will rise within the week.
In the first case scenario he will open a spot position for 10, units, on any platform at the given spreads. In the second interewt, he buys a call option with one week to expiration at a strike price, for example, of 1.
Once buying he pays the premium as shown in the trading platform, for example, 0.
His breakeven level will be the vietnam forex trading price plus the premium he paid up front. He can also profit at any time prior to expiration due to an increase in implied volatility or a move higher in the EURUSD rate.
The higher it goes, the more he can make. For example, if at expiration the pair is trading at 1.
On the other hand, if spot is below the strike at expiration, his loss will be the premium he paid, 50 pips, and no more. In the third case, he will sell a put option.
Meaning he will act as the seller, and receive the premium directly to his account. Inbox Community Academy Help. Log in Create account.
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Description:Aug 5, - Open interest indicates the number of options or futures contracts that are Options or futures contract trading volume can only increase while Missing: south africa.