time value

The great dilemma for options traders is well known: Options close to expiration cost less but expire soon. Options with more time to develop profitably cost more. How do you balance these conflicting attributes? Trading options very close to expiration and containing little or no time value...

One way to cover a short position is to own 100 shares of the underlying stock. Another, more creative way is to sell a shorter-term expiration position and buy a longer-term position. This works not only with calls, but also with puts. This calendar spread is a popular strategy; it can be...

Traders often see options as having two kinds of premium -- intrinsic value and time value. But this is not accurate. A third type of premium is where all of the uncertainty lies. Intrinsic value is easy to calculate. It is equal to the number of points the option is in the money. For example,...