If the share price rises, so does the value of the call option. The risk is the premium invested to buy the call if the stock declines, the profit potential is unlimited. A bearish investment strategy where the investor buys a put option which is a leveraged position to potentially control shares of stock for a premium. If the share price declines, the value of the put option rises. The risk is the premium invested to buy the put if the stock price rises, the profit potential is unlimited.
Every option premium is made up of some time value and some intrinsic value.
From its creation date to its expiration date an options' time value decays away and any value left is intrinsic value which rises or falls with the price of the stock. The percent time value is the time value shown as a percent of the stock price. It is a measure of any increase or decrease in volume over the last months average. Many investors believe that volume changes precede stock price changes or give an indication of the strength behind a stock price movement. If there is a term that you are not sure or you cannot find here, please feel free to send us an email using the link below.