Part 2 Master Candlestick Pattern

Key Participants in the Options Market

The options market has a mix of participants:

Hedgers: Protect themselves from risks (institutions, exporters, investors).

Speculators: Try to profit from price moves (retail & professional traders).

Arbitrageurs: Exploit price inefficiencies between cash and derivatives.

Institutions & Banks: Use options for structured products and risk management.

How Options are Priced

Options are more complex than stocks because they have two value components:

Intrinsic Value = Difference between spot price and strike price (if profitable).

Time Value = Extra premium traders pay for the possibility of future moves.

The pricing is influenced by The Greeks:

Delta: Sensitivity of option price to underlying asset moves.

Theta: Time decay (options lose value as expiry nears).

Vega: Impact of volatility on option price.

Gamma: Rate of change of delta.

Understanding Greeks is essential for advanced option strategies.