A series of options is a group of calls or warrants with the same expiration date and strike price. An investor can purchase multiple options in a series to exercise one and keep the others, depending on the movement of the stock price.
In the stock market, a series of options is a particular group of calls or warrants, all of which have the same expiration date and strike price. As an example, ABC’s common stock at $15 US Dollars (USD) per share expiring June 15, 2010 would comprise a number of options. To be considered part of the option series, the options must be identical in option type, share class, expiration month, and exercise price.
A call is an option to buy a specific number of shares of a specific security, at a given price, at some point in the future. A put option is an option to sell a specified number of shares of a specified security, at a given price, at some point in the future. Call and put options, collectively called options, do not bind the owner to exercise the option, but give him the option to do so.
An investor may purchase a number of options to provide more flexibility in exercising the options. If an investor buys multiple options in a series, he can exercise one option and keep the others. This strategy would be useful if, in the case of a call option, the price of the underlying security increases, but the investor suspects that it may continue to increase. It is possible that he will exercise an option on the series to take advantage of the price increase and yet keep his remaining options. You can then exercise the remaining options if the security’s price continues to rise, or let them lapse if the security’s price remains stable or declines.
Conversely, an investor may buy a series of put options because he expects the price of the underlying security to decline. Once the price begins to decline, he can exercise a put option to cover his costs of purchasing the option series. Since he has already covered his costs, he will only benefit if the price of the underlying security continues to decline. He can exercise his remaining options if the price continues to drop, or he can allow them to expire.
Although the option series is made up of all the options for a particular security that are identical in type, share class, expiration date, and price, an investor does not need to purchase all of the options in the series. An investor will buy only the options that he chooses. You can then exercise those options as a group or individually, depending on your objectives and the movement of the stock price.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
