An option is the right to buy or sell an underlying for a limited period of time.
- a stock option is the right to buy or sell a stock for a limited period of time.
- an index option is the right to buy or sell an index (like the S&P500) for a limited period of time
There are thousands of stocks and indexes to pick from and they all exhibit their own unique characteristic, such as risk, reward, volatility, etc….
Since this site aims to educate and show results, we will keep things simple our two option variables constant. Our first variable, the underlying, will be the S&P 500 Index Option. The second variable, time period, will be approximately 2 month out (So in June we are considering the different option contracts of August).
The other two other option specifications, type and striking price, were covered in a previous post.
