![]() ![]() Time value is important in this context because it represents the difference between the strike price and the value of the underlying asset.Ĭontracts with a strike price far from the underlying price are also considered unusual because they are defined as being "out of the money". ![]() Generally, additional time until a contract expires increases the potential for it to reach its strike price and grow its time value. The trading of a contract with an expiration date in the distant future is another sign of unusual activity. a buyer finding a seller, or a seller finding a buyer). In other words, open interest represents the quantity of contracts that individual parties have written but not yet found a counterparty for (i.e. Open interest is the number of unsettled contracts that have been traded but not yet closed by either counterparty. The volume of options activity refers to the number of contracts traded over a given time period. Exceptionally large volume (compared to historical averages) is one reason for which options market activity can be considered unusual.
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