Options Fundamentals: Rapid Fire

What this video covers

• The rights-and-obligations split: why the buyer holds all rights and pays premium, while the writer accepts all obligations and collects premium
• How to calculate total contract cost from the per-share premium quote using the 100-share multiplier, and why this is the most stolen point on the exam
• The meaning of call up, put down for intrinsic value, and why intrinsic value can never be negative (floor is zero)
• The difference between in the money (ITM), at the money (ATM), and out of the money (OTM), including which state carries intrinsic value and where time value peaks
• Why ordinary cash dividends and ordinary stock dividends do NOT adjust contracts, while non-ordinary stock dividends and stock splits DO
• The role of the Options Clearing Corporation (OCC) as issuer and guarantor, and how it eliminates counterparty risk by interposing itself in every trade
• The American versus European exercise-style distinction: not geography, but timing; American any business day, European only at expiration
• The account approval sequence: gather info, deliver ODD at or before approval, written supervisor approval, then signed options agreement within 15 days; and what restricted to closing transactions means if the agreement is late