Selling and buying stocks is a craft you should work on very careful.
In my last article on buying stock at discount, I demonstrated the power of Knowing your craft with option trading.
At this time you are in a position with long stock, and you are wishing to sell.
before we start we need to level up the knowledge with all the readers.
Option - is a contract that the buyer has the right but not the obligation to exercise.Basically we will discuss the stock options.
Call option - The buyer of this contract has the right but not the obligation to Buy the stock from the seller (writer) of this option.
Call at the money: the exercise price is equal or close to the stock Price it the market, Lets say if the stock price is $35.6 then the at the money strike will be 35.
Time to expiration- this is the time left for this contract to exist. At this time, ether you exercise or receive money if your option is in the money it has an intrinsic value. in the money : if the stock traded at 40 and your call options strike is 35, it meens your option is 5 dollars in the money and you can exercise your option and get the stock worth $40 at the price of 35. Or you can sell the option before the experation the receive the money difference.
Call option price rise when the stock rise.
Basic behavior of the option pricing, when the stock goes down the price of the option is inflated (implied volatility rises). It means that in addition of the rise in intrinsic value of the option, It also inflated because of the uncertainty. however, there some times a behavior is that when the stock rise the IV rise too, it happens when the market do not agree with the stock rise and bet against it.
Trading tactics test case:(FFIV)F5 networks inc.
