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.
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.
Put options are usually used when you think that the price of the stock is about to fall. This allows you to sell your stocks at a higher price than market value and make a profit. This method is a great way to manage your risk in the stock market.
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.
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.
Put options are usually used when you think that the price of the stock is about to fall. This allows you to sell your stocks at a higher price than market value and make a profit. This method is a great way to manage your risk in the stock market.
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 course for beginners to experts.
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