Kirk Du Plessis 10 Comments. However, we do have visitors from various other major countries all over the world. So we wanted to make sure that everyone knew the differences between the American- and European-style options. However, some options are European style and no, they do not trade only in Europe which have slight variations. American when you can exercise the option at any time up until expiration. IWM are all American-style options.
To help you avoid confusion, I think it would be prudent for me to point out a few key differences between American and European-style options:.
Whether you are a completely new trader or an experienced trader, you'll still need to master the basics. The goal of this course is to help lay the groundwork for your education with some simple, yet important lessons surrounding options. Click here to view all 20 lessons? Have a look at these two possible scenarios.
Conversely, you have some money on the table in profits but you think you still stand a chance to make more money before options expiration.
Just to let you know, the last couple of days are the worst time to exit trades because of the increased gamma risk. As such, profits can evaporate overnight. We just let our positions expire worthless and keep the entire premium we collected at expiration as profit. Honestly we should start having expiration day parties! This is the number of open contracts for both puts and calls in a given month. Some investors are adamantly convinced that stocks are better than options, simply because options expire.
However, that can be easily dealt with by rolling your option position. You can still take advantage of your winning position especially if the position looks likely to continue in your favor. This is something you can actually do even before expiration week, whether the expiration date is five, three, or two months away. It would certainly be far better to take advantage of it earlier than later. Rolling helps you bank your profits.
You can then use your original investment capital to buy another option with a further-away expiration month. In this regard, consider whether you have calls or puts.
This is something you can do continually while your stock keeps on running for calls or falling for puts. Apparently, this is a benefit unique to options and thus not found with any other security. Kirk founded Option Alpha in early and currently serves as the Head Trader. Kirk currently lives in Pennsylvania USA with his beautiful wife and two daughters. Okay, at the fear of sounding really silly, open interest is the amount of contracts out there that could be bought or sold?
No stupid questions Christine…A common misconception is that open interest is the same thing as volume of options and futures trades. This is not true. Okay so if I am understanding this correctly volume has nothing to do with open interest?
What does it mean when an option has open interest and 0 volume? Meaning you want to look for areas where there is big open interest and volume on BOTH the call and put side. That area might be where the market things the stock will close at expiration. Oh, sorry I meant Jan not Dec. Then when is a good time to close your position?
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