The Basics Of Stock Option Trading
The investing world of stocks and markets can be extremely confusing to some new to the industry. Usually someone will only master the art by means of experience and by having a good mentor. In particular, options trading systems grow more complicated than the standard buying and selling you might be accustomed to.
Keeping in mind that options trading has an added complexity, it is the intent of this article to explain the concept to you. After reading this article, you should be abile to decide if they want to pursue this further.
First of all, stock option trading has two subcategories that enable it to work the way it does. Similar to just buying and selling stock, option tracing has a little more details. Options trading systems consist of call options and put options.
If you buy a call option, this would give you the right to purchase one hundred stocks at a specific price. You can monitor the stock price until the option expires and determine if you want to exercise the option or not.
Once you have purchased a call option, you then can decide if and when you want to exercise your right to buy. You have a specific deadline in which to buy. If you decide to purchase the stocks, they are bought at the predetermined price.
A put option is the second category of stock option trading. By buying a put option, you have the right to sell one hundred shares of a particular companyas stock, usually at the strike price. This is a little weird to new users because it might be the opposite of what you are used to.
Usually, people will buy put options when they think the price of the stock will go down. This allows them to sell at a predetermined price even if the stock value goes below that price. Put options are a good way to mitigate the risk of your stocks going down in value.
To summarize this article, there are significant benefits in investing in futures and options trading. If you know what you are doing and are able to get good advice from someone knowledgeable, options trading can be very profitable for you.
Keeping in mind that options trading has an added complexity, it is the intent of this article to explain the concept to you. After reading this article, you should be abile to decide if they want to pursue this further.
First of all, stock option trading has two subcategories that enable it to work the way it does. Similar to just buying and selling stock, option tracing has a little more details. Options trading systems consist of call options and put options.
If you buy a call option, this would give you the right to purchase one hundred stocks at a specific price. You can monitor the stock price until the option expires and determine if you want to exercise the option or not.
Once you have purchased a call option, you then can decide if and when you want to exercise your right to buy. You have a specific deadline in which to buy. If you decide to purchase the stocks, they are bought at the predetermined price.
A put option is the second category of stock option trading. By buying a put option, you have the right to sell one hundred shares of a particular companyas stock, usually at the strike price. This is a little weird to new users because it might be the opposite of what you are used to.
Usually, people will buy put options when they think the price of the stock will go down. This allows them to sell at a predetermined price even if the stock value goes below that price. Put options are a good way to mitigate the risk of your stocks going down in value.
To summarize this article, there are significant benefits in investing in futures and options trading. If you know what you are doing and are able to get good advice from someone knowledgeable, options trading can be very profitable for you.
About the Author:
TheScienceOfTrading.com provides 90 free minutes of videos on option trading systems and provides a complete and detailed stock trading education for beginners to experts.
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