THE OPTIONS COURSE- Trading Techniques for Range-Bound Markets
THE OPTIONS COURSE Trading Techniques for Range-Bound Markets A large percentage of markets trend sideways within a consistent trading range throughout the trading year. In many cases, you may find stock shares or futures that have been trading sideways for some time. While these markets do not produce much in the way of profits for the traditional buy-and-hold stock trader, they do provide options traders with amazing limited risk opportunities. As previously discussed, option pricing includes time value and intrin sic value. The intrinsic value of an option is the value an in-the-money (ITM) option has if it were exercised at that point. For example, if I own an IBM 70 December call option, and IBM is trading at $80, the option has $10 of intrinsic value. This is due to the fact that the strike price of the call op tion is below the current trading price of the underlying asset. If the option has a market price of $12, then the remaining $2 of the ca