The "ask" price is the latest price offered by a market participant to sell a particular option.The "bid" price is the latest price level at which a market participant wishes to buy a particular option.Volume (VLM) simply tells you how many contracts of a particular option were traded during the latest session.They are taxed at a long-term capital gains rate. They are taxed at a short-term capital gains rate. They can be American- or European-style options. LEAPs expire in January and investors purchase them to hedge long-term positions in a given security. They are generally used as a proxy for holding shares in a company and with an eye toward an expiration date. They are generally used during catalyst events for the underlying stock’s price, such as an earnings announcement or a major news development. They are generally underpriced because it is difficult to estimate the performance of a stock far out in the future. They are more expensive compared to short-term options. The main component of risk in holding LEAPs is an inaccurate assessment of a stock’s future value.
The main component of holding long-term options is the use of leverage, which can magnify losses, to conduct the trade.
The main risk component in holding short-term options is the short duration. Time value decay is minimal for a relatively long period because the expiration date is a long time away. Time value does not decay as rapidly for long-term options because they have a longer duration. Time value and extrinsic value of short-term options decay rapidly due to their short durations.
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