Heating Oil Options Explained

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Choosing a CBD Oil: 10 Favorite Oils to Try

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Cannabidiol (CBD) oil is derived from the Cannabis plant. It has many therapeutic benefits and can be used to ease the symptoms of conditions such as anxiety, epilepsy, and cancer.

Many CBD products only contain trace amounts of tetrahydrocannabinol (THC), so they won’t make you feel high. THC is the psychoactive cannabinoid in marijuana.

While there are plenty of CBD oils and tinctures on the market today, it’s important to know that not all of them are created equal. There are currently no over-the-counter (OTC) CBD products approved by the Food and Drug Administration (FDA), and some products may not be as effective or reliable as others.

Keep in mind that everyone responds to CBD differently. So, as you try out products, it’s important to note any positive or negative reactions.

Read on to help narrow your search, and learn about 10 CBD oils and tinctures and their uses. All of the products listed here are:

  • full-spectrum, containing less than 0.3 percent THC
  • made from U.S.-grown hemp
  • third-party tested
  • meant to be taken orally

Where available, we’ve included special discount codes for our readers.

CBD oils versus tinctures

CBD oil: made by infusing cannabis in a carrier oil

CBD tincture: made by soaking cannabis in alcohol and water

Charlotte’s Web CBD Oil

Price $–$$$
CBD content 210–1800 mg per 30 ml bottle
Test analysis Available online
Ingredients Lemon twist flavor: hemp extract, fractionated coconut oil, organic lemon verbena oil
Orange blossom flavor: hemp extract, fractionated coconut oil, organic orange flavor
Olive oil flavor: hemp extract, organic extra virgin olive oil
Mint chocolate flavor: hemp extract, fractionated coconut oil, organic mint chocolate flavor oil
Available flavors Lemon twist, orange blossom, olive oil, mint chocolate
Discounted pricing available? Discounted pricing for veterans or subscription services. For Healthline readers, use code “HEALTH15” for 15% off.

This CBD oil may help to relieve stress, support recovery from exercise-induced inflammation, and improve focus. It may also help to calm your nerves and support a healthy night’s sleep.

Veritas Farms Full Spectrum CBD Tincture

Price $–$$$
CBD content 250–2000 mg per 30 ml bottle
Test analysis On product page
Ingredients Unflavored and flavored: hemp extract, organic fractionated coconut oil
Flavored products: organic stevia, essential oils and natural flavors
Available flavors Unflavored, watermelon, strawberry, peppermint, citrus
Discounted pricing available? Use code “HEALTHLINE” for 15% off.

This non-GMO CBD tincture is made from hemp grown in Colorado, using sustainable farming methods to reduce the impact on the land.

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Receptra Naturals CBD Tincture

Price $$
CBD content 750 mg per 30 ml bottle
Test analysis Available online
Ingredients Organic MCT oil, organic sunflower oil, Receptra hemp extract, organic limonene, organic passion flower extract, organic flavors (lime, ginger, lavender)
Available flavors Ginger lime
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This CBD tincture contains MCT and sunflower oils. With added passionflower extract and limonene, it may help you feel calmer.

Receptra Naturals grows their hemp on family-owned farms in Colorado.

Mana Artisan Botanics Hemp Oil

Price $$
CBD content 300 mg per 30 ml bottle
Test analysis Email company for results
Ingredients All flavors: hemp oil, Hawaiian turmeric, organic fair-trade vanilla bean
Coconut flavor: organic coconut oil
Macadamia flavor: organic Hawaiian macadamia nut oil
Available flavors Macadamia, coconut
Discounted pricing available? Use code “MANA10” for 10% off.

This organic CBD oil is infused in either macadamia nut oil or MCT coconut oil and contains turmeric and vanilla.

It may help improve focus and mental clarity and reduce feelings of anxiety and depression. It may also help reduce physical symptoms, such as inflammation, muscle pain, and arthritis.

Based in Hawaii, Mana Artisan Botanics uses a variety of locally sourced, natural Hawaiian ingredients in their products.

4 Corners Cannabis Oral Tincture

Price $$$
CBD content 250–500 mg per 15 ml bottle
Test analysis On product page
Ingredients Coconut citrus: MCT oil, CBD dominant hemp extract, limonene (orange extract)
Cinnamon: Vegetable glycerin, CBD dominant hemp extract, organic cinnamon extract, organic cane alcohol
Sweet citrus: Vegetable glycerin, CBD dominant hemp extract, limonene (orange extract)
Avocado: Virgin organic avocado oil, CBD dominant hemp extract
Available flavors Coconut citrus, cinnamon, sweet citrus, avocado
Discounted pricing available? Use code “SAVE25” for 25% off.

This organic CBD tincture may induce feelings of calmness and temporarily reduce feelings of anxiety and depression. It may also promote better quality sleep when taken before bedtime.

4 Corners uses certified organic sugar cane ethanol to extract CBD oil from their hemp plants, resulting in an oil that contains more than 60 percent CBD. It can be mixed into your favorite drink or taken on its own.

Zion Medicinals Organic Spagyric Full Spectrum Hemp Oil

Price $–$$$
CBD content 250–1500 mg per 30 ml bottle
Test analysis On product page
Ingredients Hemp, fractionated coconut oil
Available flavors Unflavored
Discounted pricing available? With subscription service

This organic CBD oil may help to improve overall health, reduce pain, and calm stress and anxiety.

It’s made using ethanol extraction and spagyric processing. Spagyric processing burns leftover plant matter to create a white ash. The ash is filtered into hemp mineral salts, which are added to the extract. Some believe this process increases the medicinal properties of the hemp.

Zion Medicinals is a Colorado-based company that was created by a couple who sought relief from symptoms of Lyme disease, such as physical pain and insomnia.

Lazarus Naturals High Potency CBD Tincture

Price $$
CBD content 750 mg per 15 ml bottle
Test analysis Link to analysis on product page
Ingredients Unflavored: Organic hempseed oil, fractionated coconut oil, hemp extract
Chocolate mint and French vanilla mocha: Fractionated coconut oil, hemp extract, natural flavors
Available flavors Unflavored, chocolate mint, French vanilla mocha
Discounted pricing available? Assistance program for veterans, people with long-term medical disability, or people with low income.

This CBD tincture is made from hemp grown in Oregon. It may help relieve pain, relax muscles, and reduce inflammation. It’s a cost-effective option that can also be used to boost mood and help manage feelings of anxiety.

Flora Sophia Botanicals Full Spectrum Hemp Extract

Price $$–$$$
CBD content 800–2100 mg per 30 ml bottle
Test analysis On product page
Ingredients Organic MCT oil, organic hempseed oil, vitamin E
Available flavors Unflavored
Discounted pricing available? Wholesale pricing for people with chronic health conditions

This organic CBD oil may help maintain good health or manage chronic conditions.

Flora Sophia Botanicals uses ethanol to extract the CBD from their Oregon-grown hemp. The base is organic MCT oil and organic hempseed oil.

Eureka Effects Full Spectrum CBD

Price $
CBD content 500 mg per 30 ml bottle
Test analysis On product page
Ingredients Organic hempseed oil, Colorado hemp extract
Available flavors Unflavored
Discounted pricing available? N/A

This CBD tincture may promote healing and overall wellness and help to alleviate anxiety, depression, and insomnia. It may also help to treat chronic pain and inflammation.

Eureka Effects oils are produced in Colorado.

Sisters of the Valley CBD Infused Oil

Price $–$$
CBD content 125–225 mg per 15 ml bottle
Test analysis Included with shipment and on product page
Ingredients Coconut oil, hemp, essential oils, blood orange essential oil
Available flavors Unflavored
Discounted pricing available? N/A

This CBD oil contains hemp and essential oils and has a coconut oil base. At $25 for a 15 ml bottle, its affordability makes it an ideal option if you’re new to CBD oils.

Sisters of the Valley created this product to help relieve body pain and boost overall health. It’s made with strains of the hemp plant that are developed to be rich in CBD and have almost no THC.

When choosing a CBD product, here are some key questions to ask. Be sure to educate yourself on how to read a product label before you make a purchase.

What type of CBD is in it?

You’ll find three main types of CBD on the market. Isolate contains only CBD, with no other cannabinoids. Full-spectrum contains all cannabinoids naturally found in the cannabis plant, including THC. Broad-spectrum contains multiple cannabinoids naturally found in the cannabis plant, but doesn’t contain THC.

Some research has found that CBD and THC used together produce what’s known as the entourage effect. This means that when used together, they may be more effective than either cannabinoid used alone.

Types of CBD

Isolate: contains only CBD with no other cannabinoids

Full-spectrum: contains all cannabinoids naturally found in the cannabis plant, including THC

Broad-spectrum: contains multiple cannabinoids naturally found in the cannabis plant, but doesn’t contain THC

Full-spectrum CBD also may include these compounds:

  • proteins
  • fatty acids
  • chlorophyll
  • fiber
  • flavonoids
  • terpenes

All the products listed above are made from full-spectrum CBD that contains less than 0.3 percent THC. Some of these companies also sell CBD isolate products if you want to avoid THC altogether.

Has it been third-party tested?

CBD products aren’t currently regulated by the FDA, which means that it can be hard to know what you’re actually buying. That’s why it’s important to look for products that are third-party tested, meaning a lab has verified that they contain what the packaging says they do. You should be able to find this information on a company’s website.

Beware of any company that promises extreme results, and remember that results may differ. A product that works well for a friend or family member may not have the same effects for you.

If a product doesn’t work for you, you may consider trying another with different ingredients or a different amount of CBD.

What, if any, other ingredients are in it?

Usually, you’ll find hemp, hemp extract, or hemp oil listed as the main ingredients on a bottle of CBD oil or tincture. These ingredients contain CBD.

Sometimes, other ingredients are added for taste, consistency, and other health benefits. If you’re looking for a product that has a particular flavor, you might want to look for one with added essential oils or flavorings. If you’re looking for possible extra health benefits, you might want to look for one with added vitamins.

Where’s the cannabis grown, and is it organic?

Look for products made from organic, U.S.-grown cannabis. Cannabis grown in the United States is subject to agricultural regulations. Organic ingredients mean you’re less likely to consume pesticides or other chemicals.

Takeaway

Look for CBD products that are third-party tested and made from organic, U.S.-grown cannabis. Depending on your needs, you may want to look for full- or broad-spectrum products. Always check the ingredients to see that they suit your needs.

CBD oil isn’t the same as hempseed oil, which is sometimes labeled as hemp oil.

CBD oil is made from the flower, bud, stems, and leaves of the Cannabis plant. Hempseed oil is made from the hemp seeds, and doesn’t contain any CBD.

Hempseed oil can be used topically for skin health, and it can be taken orally as a supplement or food additive.

CBD oil may be taken orally, or it can be added to balms and moisturizers and applied topically.

Shake the bottle before use to ensure the ideal consistency. Use a dropper — many products will come with one — to place the oil under your tongue. For maximum absorption, hold it under your tongue for 30 seconds to a few minutes before swallowing.

To determine how many drops to take, follow the recommended dose from the manufacturer or your doctor. Start with a small dose. Over time, you can increase the dose and frequency until you achieve your desired results.

Appropriate serving sizes for CBD vary greatly depending on individual factors, such as intended use, body weight, metabolism, and body chemistry.

Doses should be taken at least 4 to 6 hours apart. You can take CBD at any time of day. If you’re using it to improve sleep, take it before bed.

The immediate effects of CBD usually take effect within 30 to 90 minutes, but long-term results may take several weeks to achieve.

You can also mix CBD oil into drinks and food, but this may affect absorption.

Store CBD oils and tinctures in a dry, cool place away from direct heat and sunlight. Make sure the cap is closed tightly after each use. It isn’t necessary to refrigerate the product, but it may help to prolong shelf life.

Avoid touching your mouth with the dropper to prevent bacterial contamination and preserve the quality of the oil.

CBD is also available in capsules or gummies, or infused into skin care products, such as lotions and salves. CBD skin care products can be absorbed into the skin and don’t need to be washed off.

CBD is generally well-tolerated and safe to use, though adverse reactions such as fatigue and digestive issues are possible.

Talk to your doctor before taking CBD if you’re pregnant or breastfeeding, have any medical conditions, or take any OTC or prescription medications or supplements. CBD has the potential to interact with medications, including those that also interact with grapefruit.

Carefully read the ingredient list if you’re allergic to coconut oil or have any other possible allergies.

CBD is legal in many parts of the United States, but most manufacturers require you to be at least 18 years of age to purchase their product. It may not be legal in all countries.

Check your local laws before buying CBD. When buying online, confirm with the manufacturer that they’ll ship to your area, but also check local laws.

Since CBD products can contain trace amounts of THC, it’s still possible for it to show up on a marijuana drug test. Avoid taking CBD products if this is a concern.

Researchers don’t yet know all of the benefits or risks of CBD use. Results may be slow and subtle, and they may vary among people. You may wish to track your results using a journal so you can see the effects over time.

Want to learn more about CBD? Click here for more product reviews, recipes, and research-based articles about CBD from Healthline.

Is CBD Legal? Hemp-derived CBD products (with less than 0.3 percent THC) are legal on the federal level, but are still illegal under some state laws. Marijuana-derived CBD products are illegal on the federal level, but are legal under some state laws. Check your state’s laws and those of anywhere you travel. Keep in mind that nonprescription CBD products are not FDA-approved, and may be inaccurately labeled.

Essential Options Trading Guide

Options trading may seem overwhelming at first, but it’s easy to understand if you know a few key points. Investor portfolios are usually constructed with several asset classes. These may be stocks, bonds, ETFs, and even mutual funds. Options are another asset class, and when used correctly, they offer many advantages that trading stocks and ETFs alone cannot.

Key Takeaways

  • An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
  • People use options for income, to speculate, and to hedge risk.
  • Options are known as derivatives because they derive their value from an underlying asset.
  • A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.

Option

What Are Options?

Options are contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price at or before the contract expires.   Options can be purchased like most other asset classes with brokerage investment accounts. 

Options are powerful because they can enhance an individual’s portfolio. They do this through added income, protection, and even leverage. Depending on the situation, there is usually an option scenario appropriate for an investor’s goal. A popular example would be using options as an effective hedge against a declining stock market to limit downside losses. Options can also be used to generate recurring income. Additionally, they are often used for speculative purposes such as wagering on the direction of a stock. 

There is no free lunch with stocks and bonds. Options are no different. Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you usually see a disclaimer similar to the following:

Options involve risks and are not suitable for everyone. Options trading can be speculative in nature and carry substantial risk of loss.

Options as Derivatives

Options belong to the larger group of securities known as derivatives. A derivative’s price is dependent on or derived from the price of something else. As an example, wine is a derivative of grapes ketchup is a derivative of tomatoes, and a stock option is a derivative of a stock. Options are derivatives of financial securities—their value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.

Call and Put Options

Options are a type of derivative security. An option is a derivative because its price is intrinsically linked to the price of something else. If you buy an options contract, it grants you the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.

A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. Think of a call option as a down-payment for a future purpose. 

Call Option Example

A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future, but will only want to exercise that right once certain developments around the area are built.

The potential home buyer would benefit from the option of buying or not. Imagine they can buy a call option from the developer to buy the home at say $400,000 at any point in the next three years. Well, they can—you know it as a non-refundable deposit. Naturally, the developer wouldn’t grant such an option for free. The potential home buyer needs to contribute a down-payment to lock in that right.

With respect to an option, this cost is known as the premium. It is the price of the option contract. In our home example, the deposit might be $20,000 that the buyer pays the developer. Let’s say two years have passed, and now the developments are built and zoning has been approved. The home buyer exercises the option and buys the home for $400,000 because that is the contract purchased.

The market value of that home may have doubled to $800,000. But because the down payment locked in a pre-determined price, the buyer pays $400,000. Now, in an alternate scenario, say the zoning approval doesn’t come through until year four. This is one year past the expiration of this option. Now the home buyer must pay the market price because the contract has expired. In either case, the developer keeps the original $20,000 collected.

Call Option Basics

Put Option Example

Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their home from damage. They pay an amount called the premium, for some amount of time, let’s say a year. The policy has a face value and gives the insurance holder protection in the event the home is damaged.

What if, instead of a home, your asset was a stock or index investment? Similarly, if an investor wants insurance on his/her S&P 500 index portfolio, they can purchase put options. An investor may fear that a bear market is near and may be unwilling to lose more than 10% of their long position in the S&P 500 index. If the S&P 500 is currently trading at $2500, he/she can purchase a put option giving the right to sell the index at $2250, for example, at any point in the next two years.

If in six months the market crashes by 20% (500 points on the index), he or she has made 250 points by being able to sell the index at $2250 when it is trading at $2000—a combined loss of just 10%. In fact, even if the market drops to zero, the loss would only be 10% if this put option is held. Again, purchasing the option will carry a cost (the premium), and if the market doesn’t drop during that period, the maximum loss on the option is just the premium spent.

Put Option Basics

Buying, Selling Calls/Puts

There are four things you can do with options:

  1. Buy calls
  2. Sell calls
  3. Buy puts
  4. Sell puts

Buying stock gives you a long position. Buying a call option gives you a potential long position in the underlying stock. Short-selling a stock gives you a short position. Selling a naked or uncovered call gives you a potential short position in the underlying stock.

Buying a put option gives you a potential short position in the underlying stock. Selling a naked, or unmarried, put gives you a potential long position in the underlying stock. Keeping these four scenarios straight is crucial.

People who buy options are called holders and those who sell options are called writers of options. Here is the important distinction between holders and writers:

  1. Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights. This limits the risk of buyers of options to only the premium spent.
  2. Call writers and put writers (sellers), however, are obligated to buy or sell if the option expires in-the-money (more on that below). This means that a seller may be required to make good on a promise to buy or sell. It also implies that option sellers have exposure to more, and in some cases, unlimited, risks. This means writers can lose much more than the price of the options premium.   

Why Use Options

Speculation

Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Speculating with a call option—instead of buying the stock outright—is attractive to some traders since options provide leverage. An out-of-the-money call option may only cost a few dollars or even cents compared to the full price of a $100 stock.

Hedging

Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.

Imagine that you want to buy technology stocks. But you also want to limit losses. By using put options, you could limit your downside risk and enjoy all the upside in a cost-effective way. For short sellers, call options can be used to limit losses if wrong—especially during a short squeeze.

How Options Work

In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option would be that profits from that event. For instance, a call value goes up as the stock (underlying) goes up. This is the key to understanding the relative value of options.

The less time there is until expiry, the less value an option will have. This is because the chances of a price move in the underlying stock diminish as we draw closer to expiry. This is why an option is a wasting asset. If you buy a one-month option that is out of the money, and the stock doesn’t move, the option becomes less valuable with each passing day. Since time is a component to the price of an option, a one-month option is going to be less valuable than a three-month option. This is because with more time available, the probability of a price move in your favor increases, and vice versa.

Accordingly, the same option strike that expires in a year will cost more than the same strike for one month. This wasting feature of options is a result of time decay. The same option will be worth less tomorrow than it is today if the price of the stock doesn’t move. 

Volatility also increases the price of an option. This is because uncertainty pushes the odds of an outcome higher. If the volatility of the underlying asset increases, larger price swings increase the possibilities of substantial moves both up and down. Greater price swings will increase the chances of an event occurring. Therefore, the greater the volatility, the greater the price of the option. Options trading and volatility are intrinsically linked to each other in this way. 

On most U.S. exchanges, a stock option contract is the option to buy or sell 100 shares; that’s why you must multiply the contract premium by 100 to get the total amount you’ll have to spend to buy the call.

What happened to our option investment
May 1 May 21 Expiry Date
Stock Price $67 $78 $62
Option Price $3.15 $8.25 worthless
Contract Value $315 $825 $0
Paper Gain/Loss $0 $510 -$315

The majority of the time, holders choose to take their profits by trading out (closing out) their position. This means that option holders sell their options in the market, and writers buy their positions back to close. Only about 10% of options are exercised, 60% are traded (closed) out, and 30% expire worthlessly.

Fluctuations in option prices can be explained by intrinsic value and extrinsic value, which is also known as time value. An option’s premium is the combination of its intrinsic value and time value. Intrinsic value is the in-the-money amount of an options contract, which, for a call option, is the amount above the strike price that the stock is trading. Time value represents the added value an investor has to pay for an option above the intrinsic value.   This is the extrinsic value or time value. So, the price of the option in our example can be thought of as the following:

Premium = Intrinsic Value + Time Value
$8.25 $8.00 $0.25

In real life, options almost always trade at some level above their intrinsic value, because the probability of an event occurring is never absolutely zero, even if it is highly unlikely.

Types of Options

American and European Options

American options can be exercised at any time between the date of purchase and the expiration date. European options are different from American options in that they can only be exercised at the end of their lives on their expiration date. The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type.   Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option. This is because the early exercise feature is desirable and commands a premium.

There are also exotic options, which are exotic because there might be a variation on the payoff profiles from the plain vanilla options. Or they can become totally different products all together with “optionality” embedded in them. For example, binary options have a simple payoff structure that is determined if the payoff event happens regardless of the degree. Other types of exotic options include knock-out, knock-in, barrier options, lookback options, Asian options, and Bermudan options.   Again, exotic options are typically for professional derivatives traders.

Options Expiration & Liquidity

Options can also be categorized by their duration. Short-term options are those that expire generally within a year. Long-term options with expirations greater than a year are classified as long-term equity anticipation securities or LEAPs. LEAPS are identical to regular options, they just have longer durations.

Options can also be distinguished by when their expiration date falls. Sets of options now expire weekly on each Friday, at the end of the month, or even on a daily basis. Index and ETF options also sometimes offer quarterly expiries. 

Reading Options Tables

More and more traders are finding option data through online sources. (For related reading, see “Best Online Stock Brokers for Options Trading 2020”) While each source has its own format for presenting the data, the key components generally include the following variables:

  • Volume (VLM) simply tells you how many contracts of a particular option were traded during the latest session.
  • The “bid” price is the latest price level at which a market participant wishes to buy a particular option.
  • The “ask” price is the latest price offered by a market participant to sell a particular option.
  • Implied Bid Volatility (IMPL BID VOL) can be thought of as the future uncertainty of price direction and speed. This value is calculated by an option-pricing model such as the Black-Scholes model and represents the level of expected future volatility based on the current price of the option.
  • Open Interest (OPTN OP) number indicates the total number of contracts of a particular option that have been opened. Open interest decreases as open trades are closed.
  • Delta can be thought of as a probability. For instance, a 30-delta option has roughly a 30% chance of expiring in-the-money.
  • Gamma (GMM) is the speed the option is moving in or out-of-the-money. Gamma can also be thought of as the movement of the delta.
  • Vega is a Greek value that indicates the amount by which the price of the option would be expected to change based on a one-point change in implied volatility.
  • Theta is the Greek value that indicates how much value an option will lose with the passage of one day’s time.
  • The “strike price” is the price at which the buyer of the option can buy or sell the underlying security if he/she chooses to exercise the option. 

Buying at the bid and selling at the ask is how market makers make their living.

Long Calls/Puts

The simplest options position is a long call (or put) by itself. This position profits if the price of the underlying rises (falls), and your downside is limited to loss of the option premium spent. If you simultaneously buy a call and put option with the same strike and expiration, you’ve created a straddle.

This position pays off if the underlying price rises or falls dramatically; however, if the price remains relatively stable, you lose premium on both the call and the put. You would enter this strategy if you expect a large move in the stock but are not sure which direction.   

Basically, you need the stock to have a move outside of a range. A similar strategy betting on an outsized move in the securities when you expect high volatility (uncertainty) is to buy a call and buy a put with different strikes and the same expiration—known as a strangle. A strangle requires larger price moves in either direction to profit but is also less expensive than a straddle. On the other hand, being short either a straddle or a strangle (selling both options) would profit from a market that doesn’t move much.   

Below is an explanation of straddles from my Options for Beginners course:

Straddles Academy

And here’s a description of strangles:

How to use Straddle Strategies

Spreads & Combinations

Spreads use two or more options positions of the same class. They combine having a market opinion (speculation) with limiting losses (hedging). Spreads often limit potential upside as well. Yet these strategies can still be desirable since they usually cost less when compared to a single options leg. Vertical spreads involve selling one option to buy another. Generally, the second option is the same type and same expiration, but a different strike.

A bull call spread, or bull call vertical spread, is created by buying a call and simultaneously selling another call with a higher strike price and the same expiration. The spread is profitable if the underlying asset increases in price, but the upside is limited due to the short call strike. The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one.   Similarly, a bear put spread, or bear put vertical spread, involves buying a put and selling a second put with a lower strike and the same expiration. If you buy and sell options with different expirations, it is known as a calendar spread or time spread. 

Spread

Combinations are trades constructed with both a call and a put. There is a special type of combination known as a “synthetic.” The point of a synthetic is to create an options position that behaves like an underlying asset, but without actually controlling the asset. Why not just buy the stock? Maybe some legal or regulatory reason restricts you from owning it. But you may be allowed to create a synthetic position using options.   

Butterflies

A butterfly consists of options at three strikes, equally spaced apart, where all options are of the same type (either all calls or all puts) and have the same expiration. In a long butterfly, the middle strike option is sold and the outside strikes are bought in a ratio of 1:2:1 (buy one, sell two, buy one).

If this ratio does not hold, it is not a butterfly. The outside strikes are commonly referred to as the wings of the butterfly, and the inside strike as the body. The value of a butterfly can never fall below zero. Closely related to the butterfly is the condor – the difference is that the middle options are not at the same strike price. 

Options Risks

Because options prices can be modeled mathematically with a model such as the Black-Scholes, many of the risks associated with options can also be modeled and understood. This particular feature of options actually makes them arguably less risky than other asset classes, or at least allows the risks associated with options to be understood and evaluated. Individual risks have been assigned Greek letter names, and are sometimes referred to simply as “the Greeks.” 

Below is a very basic way to begin thinking about the concepts of Greeks:

Consumers and Heating Oil

Approximately seven percent of American households – some 8.5 million in total, with nearly one-third in the Northeastern states – rely on heating oil to keep warm in winter.

Late summer is a good time for consumers to further winterize their homes to help reduce fuel use (and save money) and to explore options for purchasing winter supplies, including seasonal contracts with heating oil companies that may offer price advantages.

Ever wonder where heating oil comes from? Or why prices fluctuate? Or even how you can help to lower your heating oil bills? Residential Heating Oil Prices: What Consumers Should Know by the U.S. Department of Energy helps answer some of those questions.

As the weather grows colder, refineries manufacture most (about 90%) of the heating oil consumers need, but they also draw on supplies produced earlier in the year.

Maximum inventory of heating oil in the reserve will be two million barrels. The Department of Energy believes that a two-million-barrel reserve will provide relief from weather-related shortages for approximately ten days, which is the time for ships to bring heating oil from the Gulf of Mexico to New York Harbor. See EIA’s information on the Northeast Heating Oil Reserve.

Help Paying Heating Bills

You may be able to get financial aid to help pay your heating bills this winter. The federal LIHEAP program (Low Income Home Energy Assistance Program) gives money to states to help qualifying families pay their heating bills.

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