I am starting to learn about options (derivatives) by reading a book and following a couple of websites.
I have learnt the basics so far, but now I have a doubt: what happens when an option's value reaches 0?
For instance, I bought a call option at 2 (quantity=100), but the next day the underlying stock crashed, and the call option that I bought at 2 is now at 0.
- Is this scenario even possible, i.e. can a call option actually touch 0 before expiry?
- What happens to the investment that I made in buying that call option? Since there will be no buyer at 0, I am assuming that i will not be able to sell that option, right?
- If the price of the call option actually falls to 0, theoretically, my net loss would be 200 (2 x 100), or more than that?
Submitted July 12, 2018 at 06:36AM by roadbat https://ift.tt/2zw9w91
