To The Moon

[Introduction]
On the evening of August 12, Samuel Wong (RNF No.: WJW300873536), Investment Representative at Tiger Brokers (Singapore) $Tiger Brokers(TIGR)$ , hosted an options-themed sharing session. With over five years of cross-asset trading experience, Samuel specializes in breaking down complex derivatives concepts into practical, actionable language.

This article will guide you from zero to understanding the essence of options contracts, pricing logic, and quote pages.

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[Disclaimer] The content herein is for educational purposes only and does not constitute investment advice to buy, sell, or hold any financial product. Options trading involves significant risk, including the potential loss of entire principal. Investors should make independent judgments based on their own circumstances.

1. What Is an Option? A Right, Not an Obligation

An option is a derivative contract whose value depends on the price movement of an underlying asset (e.g., a stock or index).

• Call Option: Grants the buyer the right, but not the obligation, to buy the underlying asset at a predetermined price (Strike Price) within a specified period.

• Put Option: Grants the buyer the right, but not the obligation, to sell the underlying asset at a predetermined price within a specified period.

Samuel used a real estate deposit analogy: when you pay an option fee to a seller, you secure the right to purchase a property at an agreed price within two weeks. Regardless of market fluctuations during that period, you can buy at the agreed price; if you walk away, you only lose the option fee. Stock options work the same way—the buyer pays a premium for the right to trade the stock at a specific price in the future.

Every option contract also carries an expiration date. Unlike stocks, options have a time limit and cannot be held indefinitely.

2. The Five Greeks of Options Pricing

On Tiger's options quote page, you will see five core metrics, collectively known as the Greeks:

3. Intrinsic Value vs. Time Value

An option's price consists of two components:

Option Price = Intrinsic Value + Time Value

• Intrinsic Value: The actual profit if exercised immediately. For example, if a stock trades at $150 and a Call has a strike of $145, the intrinsic value is $5.

• Time Value: The premium the market pays for the "chance to profit in the future." The longer the time to expiration and the higher the volatility, the greater the time value. As expiration approaches, time value decays rapidly toward zero.

4. ITM, ATM, and OTM

Samuel specifically warned: Cheap is not always good. OTM options appear to offer "low cost, high leverage," but they are more like betting on a goal in the last 10 minutes of a football match—the odds are enticing, but the probability is extremely low. Especially near expiration, the time value of OTM options can quickly evaporate to zero.

5. How to Read an Options Chain

Using the S&P Mini Index Option XSP as an example, Tiger's Options Chain typically displays:

• Green indicators: ITM options (Calls with lower strikes, Puts with higher strikes)

• Bid / Ask: Buyers look at Ask; sellers look at Bid

• Mid Price: The midpoint between Bid and Ask

• Last Price: The most recent transaction price for that strike

Practical Tip: As an option buyer, if you want to avoid paying the market spread, try placing a Limit Order between the Bid and Ask. Samuel noted that when he is not in a rush, he often saves several dollars per contract this way. However, for urgent exits, a Market Order or more aggressive Limit may be necessary.

6. Quick Breakeven Calculation

If you buy a Call and want to know how high the stock must rise to break even:

Breakeven = Strike Price + Premium Paid (Time Value)

For example, with a strike of $217.25 and a time value of $2.75, the breakeven is $220. This can also be automatically calculated using Tiger's built-in Option Price Calculator, which provides theoretical pricing based on the Black-Scholes model.

7. Trading Hours Reminder

U.S. stock options do not support pre-market or after-hours trading. Regular trading hours are 9:30 AM – 4:00 PM EST (9:30 PM – 4:00 AM Singapore Time). After the market closes, option prices stop moving. Post-market stock price fluctuations do not directly reflect the next day's option opening prices; use the options calculator for estimates.

Offline seminar at Tiger Brokers Singapore