What Are Strike Prices And Premium In Binary Options
The exercise price or strike price is the price at which the primary stock can be sold out or purchase in binary trading in case the option is exercised. For all options classified on the ASX options market, it is the responsibility of ASX to set the strike prices. Moreover, there is a range of strike prices set the expiry date for every primary security within the parameters of binary trading. However, the market value of the primary security changes fresh strike prices will be issued.
What is premium?
The only component that is not standardized through the exchange is the option premium. The price at which the option is sold out or purchased between a seller and buyer is referred as a premium in binary option. However, the price of buying and selling of shares on the stock exchange is decided through the influences of supply and demand. For buying the stock buyers submit bids, in contrast to sell their stock submit their proposal and this is the place where the market price set in. Nonetheless, this is not for options.
By a combination of factors comprising the primary security's market value option premiums are determined; likewise the time of expiry and the strike price of the option is determined.
You require multiplying the 'cents per share' with the number of shares enveloped through the option for calculating the overall premium for a specific option. Moreover 'cents per share' refers in option premium over stocks. Therefore, on the exchange at $1.50 an option quoted would cost you a trading fees initially and subsequently exchange and brokerage fees.
Do you understand codes?
On the stock exchange in the similar manner as different classified securities exchange traded options are classified. Like a five or six letters code the option are exhibited. The initial three code letters are similar to the code for the primary stock. Moreover, the fourth and fifth letters are implemented to highlight the month of expiry and option series. If required, occasionally the options have six letters. For instance, on the ASX Woolworths Limited is classified as the code WOW. Thus, options that contain Woolworths Limited as the primary stock would have codes similar to "WOWXA".
On the ASX complete exchange traded options are classified either in classification 1 stock options or classification 2 stock options. There is dissimilarity, in expiry months on offer, in every classification of stock options. Moreover, you can choose longer term option contracts.
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