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asked 3 years ago
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Opinion has it that there are three drivers of an option's time value. These are the:
• expiry date – time value declines as the expiry date approaches
• option strike/current price relationship – the likelihood of the two figures becoming a successful trade
• volatility – if the market climate is markedly unstable, price change could make the option worthwhile to exercise. Both the option's time value and premium are normally higher in a volatile market.
Another major consideration before embarking on futures options trading is the commission fee. Be crystal-clear at the outset how commission fees are calculated, and watch out for hidden fees that could seriously affect trading costs. Whether it is a traditional brokerage service or an online trading platform, read the fine print to avoid being caught out by charges.
Establish whether fees are payable per trade or a round-turn basis, the latter of which includes execution of both the buy and sell. Charges vary between companies, so ask. Some firms, for instance, have fixed fees while others charge a percentage of the option premium. Keep in mind that commission fees can not only eat into your trading profits, potentially, charges could easily exacerbate your losses.
• expiry date – time value declines as the expiry date approaches
• option strike/current price relationship – the likelihood of the two figures becoming a successful trade
• volatility – if the market climate is markedly unstable, price change could make the option worthwhile to exercise. Both the option's time value and premium are normally higher in a volatile market.
Another major consideration before embarking on futures options trading is the commission fee. Be crystal-clear at the outset how commission fees are calculated, and watch out for hidden fees that could seriously affect trading costs. Whether it is a traditional brokerage service or an online trading platform, read the fine print to avoid being caught out by charges.
Establish whether fees are payable per trade or a round-turn basis, the latter of which includes execution of both the buy and sell. Charges vary between companies, so ask. Some firms, for instance, have fixed fees while others charge a percentage of the option premium. Keep in mind that commission fees can not only eat into your trading profits, potentially, charges could easily exacerbate your losses.
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