Access to Loans Essential in Volatile Economy, Markets
Download our abbreviated version of this section: Introduction to Options: The Basics.
A. What is an option?
For listed stock options, the expiration date is the
third Friday of the specified month. The format used to describe an option is: An option to sell 100 shares
of GE at $35 per share, any time before expiration,
next January. B.
How does an option work?
The price the buyer pays to the seller is the
premium.
There are two types of options:
A call option gives its owner the
right to buy something.
A put
option gives its owner the right to
sell something.
Thus, the option contract gives its owner the right to buy or sell
This represents an option to
buy 100 shares of IBM at $110 per share, any time before the market closes
on the 3rd Friday, next April.
Example:
GE Jan 35 put:
C.
Why should options be part of your
investment portfolio?
Stock options can be used in conservatively to
If you can make good profits by using conservative methods, why take unnecessary risk?
E.
Am I now ready to trade?
No. But you are ready to open a paper trading account and practice buying and/or selling a few option contracts to see
what happens. Don't use real money yet. Before trading, you want to be aware of basic
strategies you can use.
Read my personal trading philosophy,
which includes advice for option rookies.
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