Stocks with high options volume

These metrics can offer insight into the activity beneath a potential price move

This ETF is so popular that the bid-ask spread is often as narrow as a penny wide. Q1 is set to be the best quarter since Still, investors should account for the whispers about a potential recession coming later in the year or next year. This ETF can be useful to investors in multiple ways: a high-risk, high-reward investment for those who can tolerate short-term uncertainty, as well as a smaller part of a diverse portfolio with a buy-and-hold strategy.

This means that investors face credit risk in terms of the institution that backs the ETN, rather than the tracking risk that investors face with an ETF. The lower credit quality of the bonds means that investors face higher market risk, but also the prospect of higher returns. This includes exposure to a variety of subindustries within finance: banking, insurance, financial services, consumer finance, real estate investment trusts REITs , and more.

When Financhill publishes its 1 stock, listen up. Since the price of an option is the same as its premium, this list provides options with the highest premiums. For example, here are ten of the stocks on the list as of late March but you can check any date you happen to be reading this post:. These stocks have the highest option premiums. Because of this, they could be an excellent source of income for option sellers. But selling these options could also be a big mistake.

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The option premium is the intrinsic value plus the time value of an option. Here is what each of these terms mean. Intrinsic value measures the benefit that would be gained by the owner of the option if he were to exercise it. In other words, if you own this option and want to buy a share of ABC Corp. The intrinsic value for a put option works similarly. If a put option for ABC Corp.

In this case, if you own a share of ABC Corp. If a call option has a strike price above the current price or a put option has a strike price below the current price, the option has no intrinsic value. This is called an out-of-the-money option. If the owner of an out-of-the-money option exercises it, he will either pay more when buying the stock or make less when selling it.

This is generally not what the owner wants, so options that are way out-of-the-money are considered to have an intrinsic value of zero.

My post Options Education Essential Basics has more about this. We might expect the price of an option to be equal to its intrinsic value. In most cases, options cost more than their intrinsic value.

This difference between the price of the option and its intrinsic value is called its time value. Because of this time element, this cost is called the time value. An option premium is simply the time value plus the intrinsic value of an option.

In other words, the option premium is the option price. Should you sell options with the highest premium?

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It could be a good idea to sell options with the highest premium. Again, if an option has a higher price, you can make more money per option sold. But whether you want to sell options with high premiums depends on a few things. First, keep in mind that selling an option brings with it an obligation.

If you sell a call option, you agree to sell the underlying stock at the strike price even if its price later rises. If you sell a put option, you agree to buy the underlying stock at the strike price even if its price later falls.

Note that an option may have a high premium because traders are being irrational. Maybe there is no good reason for the premium to be high. On the other hand, the premium may be high on a call option because there is a good chance the price will rise during the term of the option. Or it may be high on a put option because there is a good chance the price will fall during the term of the option. In other words, a stock may have a high option premium because it is more volatile than other stocks.

In this case, it may be a bad idea to sell options on a stock that have a high option premium. Maybe the premium is high, but because of the high risk of the owner exercising the option, the premium is not high enough to warrant taking the risk.

Most Active F&O contracts by Volume

Your overall option trading strategy, however, will influence whether you seek out high option premiums for your trades, as explained below. Whether or not you base your trades on finding stocks with the highest option premiums can depend on your strategy. This allows you to control stocks at a lower cost. Here are some common options trading strategies that would seek out stocks with high premiums since they focus mostly on income.

Some also have a hedging element, which I always like to add to lower risk. If you want to learn more about advanced Butterfly Option Spreads, click here to read my article on them.