Below we have tried to answer the most common questions
you may have about Options.
What happens to my option if I do nothing?
If you bought a call or put you would lose the premium you
paid for the option plus the commissions and fees incured with
the purchase. If you sold a call or put and your option is in the
money, you will most likely be assigned and you will have to
sell or buy stock.
When can I anticipate being assigned?
You can anticipate being assigned anytime your option becomes
in the money. Individual Investors may be automatically
assigned or exercised at expiration by The Options Clearing
Corporation if the option is .75 of a point or more in the
money. Also, most brokerage firms have rules under which
options will automatically be exercised; check with your broker
to determine which automatic exercise rule may apply.
What is a Market Maker?
They take the opposite side of public orders by competing in an
open outcry auction market. They provide liquidity in option
trading by risking their own capital for personal trading.
What is European style and American style option?
American style is an option contract that can be exercised at
any time between the date of purchase and the expiration date.
All stock options are American style. European style is an
option contract that can only be exercised on the expiration date.
What are Equity Leaps?
Equity Leaps or long term equity anticipation securities, are
long dated put and call options on common stock. These long
term options provide the holder the right to purchase, in the
case of a call, or sell, in the case of a put, a specified number of
stock shares at a predetermined price up to the expiration date
of the option, which can be 3 years in the future.
When do Equity Leaps expire?
As with equity options, the expiration date is the Saturday
following the third Friday of the expiration month. All equity
leaps contracts expire in the month of January.
What happens to my order after I enter it with my broker?
Your order may take many routes depending on your broker
and the firm that represents them on the trading floor. Most
likely it will go through CBOE order routing system, which is a
network of communication lines from retail member firms
computers that collect and route wire orders of up to 2,000
contracts to one of three trading floor locations, based on price
and volume parameters set by each member firm and CBOE.
What is a stop order and a stop-limit order?
A stop order is an order that is placed away from the current
market, that becomes a market order if the security trades at
the price specified on the stop order. Buy stop orders are
placed above the market while sell stop orders are placed below
it. A stop-limit order becomes a limit order, rather than a
market order, when the security trades at the price specified on
the stop.
If you find that your question is not answered on this page,
please email us tnash@soloenterprisesinc.com
Trading Options and Futures involves risk and is not
suitable for all investors, you are not guaranteed to make
money. Never put at risk more money than you are willing
lose.
you may have about Options.
What happens to my option if I do nothing?
If you bought a call or put you would lose the premium you
paid for the option plus the commissions and fees incured with
the purchase. If you sold a call or put and your option is in the
money, you will most likely be assigned and you will have to
sell or buy stock.
When can I anticipate being assigned?
You can anticipate being assigned anytime your option becomes
in the money. Individual Investors may be automatically
assigned or exercised at expiration by The Options Clearing
Corporation if the option is .75 of a point or more in the
money. Also, most brokerage firms have rules under which
options will automatically be exercised; check with your broker
to determine which automatic exercise rule may apply.
What is a Market Maker?
They take the opposite side of public orders by competing in an
open outcry auction market. They provide liquidity in option
trading by risking their own capital for personal trading.
What is European style and American style option?
American style is an option contract that can be exercised at
any time between the date of purchase and the expiration date.
All stock options are American style. European style is an
option contract that can only be exercised on the expiration date.
What are Equity Leaps?
Equity Leaps or long term equity anticipation securities, are
long dated put and call options on common stock. These long
term options provide the holder the right to purchase, in the
case of a call, or sell, in the case of a put, a specified number of
stock shares at a predetermined price up to the expiration date
of the option, which can be 3 years in the future.
When do Equity Leaps expire?
As with equity options, the expiration date is the Saturday
following the third Friday of the expiration month. All equity
leaps contracts expire in the month of January.
What happens to my order after I enter it with my broker?
Your order may take many routes depending on your broker
and the firm that represents them on the trading floor. Most
likely it will go through CBOE order routing system, which is a
network of communication lines from retail member firms
computers that collect and route wire orders of up to 2,000
contracts to one of three trading floor locations, based on price
and volume parameters set by each member firm and CBOE.
What is a stop order and a stop-limit order?
A stop order is an order that is placed away from the current
market, that becomes a market order if the security trades at
the price specified on the stop order. Buy stop orders are
placed above the market while sell stop orders are placed below
it. A stop-limit order becomes a limit order, rather than a
market order, when the security trades at the price specified on
the stop.
If you find that your question is not answered on this page,
please email us tnash@soloenterprisesinc.com
Trading Options and Futures involves risk and is not
suitable for all investors, you are not guaranteed to make
money. Never put at risk more money than you are willing
lose.
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Unauthorized reproduction of any solo enterprises
Inc. publications is strictly prohibited. Copyright
2006, Solo Enterprises Inc. All rights reserved.
Inc. publications is strictly prohibited. Copyright
2006, Solo Enterprises Inc. All rights reserved.
Solo Enterprises
Inc.
Inc.