A Bear market happens when the broad market index falls by 20% or more from the high over a few months due to negative investor sentiment. 20% is considered as a minimum threshold limit. The opposite of a bear market is a bull market. In a bear market, we may have occasional small rallies but the general trend will be downward. Market participants keep selling investments … [Read more...] about Bear market: what causes them and how to invest?
Finance
What is time decay in options and how it can impact trading?
Value of an option contract decreases as it nears the expiration date. This decrease in value is described as Time decay, which is also called Theta. As an investor or trader you should keep in mind that the expiration date of a contract impacts option prices. Out of the money call and put options are more affected by Theta factor than in the money option contracts. When … [Read more...] about What is time decay in options and how it can impact trading?
What is Open interest in option trading?
Open interest (OI) means the number of open option contracts that have not been exercised, closed out or expired. OI tracks every open position in a particular contract. You can find open interest (OI) details for an option contract in the option chain maintained by the exchange. Open interest is different from the total volume of contracts traded in the market. Volume … [Read more...] about What is Open interest in option trading?
European vs. American Options: What is the difference?
Option is a derivative contract that gives its holder the right to buy or sell the underlying asset at an agreed price and agreed time.We have two different styles of exercising options: American style and European style. Both styles specify when the option contract can be exercised by the buyer and have nothing to do with a geographic region. Options are either calls or … [Read more...] about European vs. American Options: What is the difference?
What is Protective Put and how does this strategy work?
In hedging, we have a number of strategies to limit the risk of losing profit and to minimize losses. In this article, we have discussed what is a protective put strategy and how they work in the option market. Protective put is a hedging strategy which uses put option contracts to reduce the potential risk of owning a stock. Protective put is used by those traders and … [Read more...] about What is Protective Put and how does this strategy work?