In-depth answers on your most common options trading and technology questions.
My broker’s website appeared online but orders weren’t being accepted. I tried and tried again until I really needed to exit the trade. The loss was growing quickly and I risked assignment on a big position.
The majority of the big online brokers are fairly safe. I use TDAmeritrade.
However, don’t think all the discount brokers are made equal. I have to share my story as a word of caution.
When trading options, you can exit a position through the execution of an opposing contract of the same type, series, and expiration. Such a transaction must take place prior to the expiration or exercise of the contract.
In this specific example, a call implied volatility (IV) goes up as the strike price goes down, but sometimes the IV is higher at both extremes, deep in the money and deep out of the money. As you know, you are describing the volatility smile, the extremes in price IV for options that are deep in-the-money. You know from any graphical representation of the smile that as the strike prices move at a rate of change or Delta from its spot (current) price, the skewness of the tails sharply rise. This appears to correlate with the way options are priced, accounting for both intrinsic value and time value.
There are many types of options trading strategies that can help you fulfill your trading strategy. Depending on your investment criteria, desired outcome, and market outlook, you can trade calls and puts in different ways to earn income or protect a portfolio position from loss.
