𝐁𝐚𝐬𝐢𝐜𝐬 𝐨𝐟 𝐃𝐞𝐫𝐢𝐯𝐚𝐭𝐢𝐯𝐞𝐬 - 𝐏𝐚𝐫𝐭 𝐈𝐈𝐈

Topics covered:

• Moneyness of an Option

• Intrinsic value & Time value of an option

• Why Intrinsic value & time value matters

• Implied Volatility

Time for a 🧵

Curated in collaboration with
@AdityaTodmal

• Moneyness of Option contract:
• ITM option
• ATM option
• OTM option

• Intrinsic Value of an option:
• Positive payoff for the buyer

• Intrinsic value of ITM CE options = Spot- Strike

• Intrinsic value of an:
i) ITM for a CE option: Positive
ii) ATM for a CE option: Zero
• Intrinsic value is never Negative

𝐁𝐚𝐬𝐢𝐜𝐬 𝐨𝐟 𝐃𝐞𝐫𝐢𝐯𝐚𝐭𝐢𝐯𝐞𝐬 - 𝐏𝐚𝐫𝐭 𝐈𝐈

• How options can be used

• How to trade in options & exit strategy- buyers

• Imp of theta decay

• How to trade in options & exit strategy -sellers

Time for a Thread🧵

Curated in collaboration with
@AdityaTodmal

• The lame textbook def of right but not the obligation etc is simply confusing

• This is how you can remember, by understanding the logic of the instruments with your view on the market

• In a nutshell: Options are instruments used to express your view on the market

• The view could be same but the instruments played by the buyers and sellers could be different

• For Option buyers:

• Its imp to set a price target

• and to set a time target as well

• Time is an important factor to be considered

• Movement should outweigh the time decay