Research 4 - Options Valuations

Options Valuations compose of,
1) Intrinsic Value
2) Time Value

Intrinsic Value = Stock Price - Exercise Price
Time Value = Call Premium - Call Intrinsic Value
Minimum Intrinsic Value = 0 (i.e. total loss of capital/premium paid)

Intrinsic Value = ITM (In The Money)
No Intrinsic Value = OTM (Out of The Money)
Strike Price = ATM (At The Money)

Under Call Options (Buy),
ITM - Underlying Asset > Strike Price
OTM - Underlying Asset < Strike Price
ATM - Underlying Asset = Strike Price

Under Put Options (Sell)
ITM - Underlying Asset < Strike Price
OTM - Underlying Asset > Strike Price
ATM - Underlying Asset = Strike Price

Basically,
ITM = Profit
OTM = Loss
ATM = Breakeven

Research 3 - What is Options? Why Options?

Option is,
1) The right
2) Not the obligation
3) To buy/sell an asset
4) At a fixed price (Strike/Exercise price)
5) Before a predetermined date

Risk in option = Premium paid, nothing more

Options is either Call(Buy) or Put(Sell)

Options provide,
1) Excellent leverage - Small amount of money control large amount of stock
2) Portfolio hedging
3) Flexibility