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.
Buying a call option gives you the ability to purchase one hundred stocks at a predetermined price, known as the strike price. However, keep in mind that you do not have to exercise the option if it is not in your favour.
After buying options, you would monitor the price of the stock and hopefully see it rise. Your option would be valid until a specific date. Up until the expiry date you could purchase the stocks at the predetermined strike price.
Next, we will look at put options. Put options give you the right to sell one hundred stocks at a predetermined price. This concept may seem a little backwards since it is the opposite of what you might know about standard trading.
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.
So, consider your options (no pun intended) when you look at the difference between things like futures and options trading. If you know how to do it correctly, options trading systems can be well worth the money and effort put into it.
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.
Buying a call option gives you the ability to purchase one hundred stocks at a predetermined price, known as the strike price. However, keep in mind that you do not have to exercise the option if it is not in your favour.
After buying options, you would monitor the price of the stock and hopefully see it rise. Your option would be valid until a specific date. Up until the expiry date you could purchase the stocks at the predetermined strike price.
Next, we will look at put options. Put options give you the right to sell one hundred stocks at a predetermined price. This concept may seem a little backwards since it is the opposite of what you might know about standard trading.
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.
So, consider your options (no pun intended) when you look at the difference between things like futures and options trading. If you know how to do it correctly, options trading systems can be well worth the money and effort put into it.
About the Author:
TheScienceOfTrading.com provides 90 free minutes of videos on option trading systems and provides a complete and detailed learning to day trade for beginners to experts.
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10:28 AM
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