[Options Help]

On 12/12/2019 at 19:55, CharlotteIG said:

@jamesleo1 When buying a call/ put your maximum risk is the premium you put down. In the case below: 

If you're buying a call at 7110, and the price is around there it means you're buying at the current price. Your break even point is 7130, (Strike + premium) if the market expires above that price you're in the money. If the price settle out of the money, the maximum you can lose is 20 x bet size. 

 

If you're buying a put at 7110, and the price is around there it means you're buying at the current price. Your break even point is 6990, if the market expires below that price (Strike -Premium) you're in the money. If the price settle out of the money, the maximum you can lose is 20 x bet size. 

 

Lets say you were doing £1 per point. If the market were to settle at 7110, you would lose the £20 on each, but if market settles either above 7150 or below 6970 you will lose £20 on one side but it would be outweighed by the profit on the other side. 

^ Settling at 7150 you would have a £20 profitable position, but the lost on the other side (max loss of £20) ^

 

It's not about spread it's about finding the break even point using the price you paid for that option at the time. Below you can find some diagrams showing you how to work out break even points. 

 

 

 

Let me know if you need anything else clarified. 

 

 

within IG Markets, if a Put Option is in the money at expiry, what is the process to close the trade properly? ie. do I need to buy the underlying asset? and then exercise the put?

or, can i just close the position?

or just let it expire for the profit?

thank you