Greeners

Thanks. I found some good articles last night that describe the black Scholes formula etc and the Greeks. I had thought the premium was a fixed one off payment Incurred when the position was opened, but if I understand correctly, I am essentially spread betting on the points movement of the Options premium which itself is impacted by a number of factors including price of the underlying asset, Strike price, volatility, time to expire etc.

To add some more detail I opened two test trades today based on the following. Oil daily expiry @ starting price of 4258 Short call @4300 - option cost was 8.9 @ £1, spread of 5 resulting in £8.90 Margin and starting position of £-5. Short call @4220 - option cost was 45 @ £1, spread of 4.4 resulting in £45.90 margin and starting position of £-4.40. Questions: I thought a short call was essentially bearish - based on traditional options I would receive a premium and hope that the underlying asset price remains static or falls. For some reason an increase in the underlying asset price is what resulted in the option call sell price and therefore one of my positions turning into profit, and so i am totally confused as to how profit/loss works once my positions are open. Also the short call @ 4220 was making more profit in relative to the short call @ 4300. Is there a formula or basic method someone can provide which allows me to understand how the underlying asset price etc is actually going to influence the different call options available?

Hi I have been experimenting with options trading on my demo account and am struggling to make sense and align the position numbers and the way options trading works on IG with the theory of trading options. For example I have tested a vertical bullish spread and purchased a Long call on Oil at 4240 (current price was 4260). I then purchased a short call on Oil at 4280. Therefore I think my long call is in the money and my short call is out of the money. My balance has reduced by roughly £100 due to a £40 margin on the long call and a £60 margin on the short call. IG states that margin and premium are interchangeable so does the £40 for my long call represent the premium I have paid? If so then why have I paid £60 for the short call when as the writer I should receive a premium? I am confused as to what Premium I have actually paid for the long call and what premium I would receive for the short call? As I’ve done a vertical spread I believe that a rising price will eventually provide profit (albeit offset by the short call) but a lowering price would lead to a loss (limited to the long premium minus the short premium I receive). Is anyone able to provide an IG spread bet example based on a vertical spread hi lighting how I can work out the premiums before I actually place a trade. thanks Justin