Q: What is the main value of open interest in an option?
A: Primarily it will provide an indication as to liquidity. Greater open interest would generally indicate liquidity sufficient to perform larger trades on a particular contract with less price discrepancy, while smaller amounts of open interest would indicate the opposite.
Q: What is quadruple-witching and how often does it occur?
A: It’s the day that single stock futures, stock options, stock index futures and stock index options all expire. This occurs four times yearly on the 3rd Friday of March, June, September and December, respectively.
Q: What does it mean to roll an options contact forward and why would I do so?
A: You roll a contract forward by closing your existing contract(s) and then putting on a similar contract (same underlying, number of contracts and strike) with an expiration month further into the future. You do so to allow your strategy to have more time to play out. A roll enables you to maintain your position beyond the initial expiration.
Q: If an option is ITM will it be exercised automatically or not?
A: It depends. They will if they are ITM buy at least $0.01 on Friday before expiration. The Option Clearing Corp (OCC) does so automatically if they are ITM by at least that amount.
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