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The other major kind of option is called a put option, and its value increases as the stock price goes down. So traders can wager on a stock’s decline by buying put options.
The option strategy where the middle options (the body) have different strike prices is known as a Condor. A Christmas tree butterfly (not to be confused with the unrelated option combination also called a Christmas tree ) consists of six options used to create a payoff diagram similar to a butterfly but slightly bearish or bullish instead of ...
The intrinsic value (or "monetary value") of an option is its value assuming it were exercised immediately. Thus if the current price of the underlying security (or commodity etc.) is above the agreed price, a call has positive intrinsic value (and is called "in the money"), while a put has zero intrinsic value (and is "out of the money").
This extra money is for the risk which the option writer/seller is undertaking. This is called the time value. Time value is the amount the option trader is paying for a contract above its intrinsic value, with the belief that prior to expiration the contract value will increase because of a favourable change in the price of the underlying asset.
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Option strategies are the simultaneous, and often mixed, buying or selling of one or more options that differ in one or more of the options' variables. Call options , simply known as Calls, give the buyer a right to buy a particular stock at that option's strike price .