I learn stock options trading.
Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. As a lower indicator, MACD appears in a separate panel below the price chart, using three components – the MACD line, signal line, and histogram – to reveal changes in strength, direction, and momentum of … Read more
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of price changes, helping traders identify overbought and oversold conditions. Developed by J. Welles Wilder in 1978, RSI oscillates between 0 and 100, with readings above 70 traditionally indicating overbought conditions and below 30 suggesting oversold. For option traders, RSI … Read more
Lower indicators are technical analysis tools that appear in separate panels below the price chart, providing insights into momentum, strength, volume, and market sentiment without cluttering the price action. These oscillating indicators typically move between defined ranges or around zero lines, making it easy to spot overbought and oversold conditions, divergences, and trend changes. For … Read more
Upper indicators are technical analysis tools that appear directly on the price chart, overlaying the candlesticks or bars to provide visual context about trend, support, resistance, and volatility. Unlike lower indicators that oscillate in separate panels below the chart, upper indicators interact directly with price action, making them invaluable for identifying key levels for strike … Read more
Deep out-of-the-money (Deep OTM) options have strike prices far from the current stock price with very low probability of expiring in-the-money. For calls, deep OTM means strikes significantly above the stock price. For puts, it means strikes significantly below the stock price. These options trade for pennies, have deltas near zero, and almost always expire … Read more
Deep in-the-money (Deep ITM) options have strike prices far from the current stock price, giving them substantial intrinsic value and making them behave almost exactly like stock positions. For calls, deep ITM means strikes significantly below the stock price. For puts, it means strikes significantly above the stock price. These options have deltas approaching 1.00 … Read more
Exercise is when an option buyer chooses to use their rights – either buying 100 shares at the strike price (calls) or selling 100 shares at the strike price (puts). Unlike assignment which happens to option sellers, exercise is an active choice made by option buyers. While most options are closed or expire without exercise, … Read more
At-the-money (ATM) options have strike prices equal to or very near the current stock price, making them the most sensitive and volatile of all options. These options live on a knife’s edge – the slightest move transforms them from worthless to valuable or vice versa. ATM options have maximum time value, highest theta decay, and … Read more
Out-of-the-money (OTM) options have no intrinsic value and would result in a loss if exercised immediately. For calls, OTM means the strike price is above the current stock price. For puts, OTM means the strike price is below the current stock price. These options are the bread and butter of income strategies because they offer … Read more
In-the-money (ITM) options have intrinsic value, meaning they would be profitable if exercised immediately. For calls, ITM means the strike price is below the current stock price. For puts, ITM means the strike price is above the current stock price. These options move almost dollar-for-dollar with the stock, making them behave like stock ownership with … Read more