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.
You would buy what is called a call option which gives you the right to purchase a companyas stock. The major difference with this is that you buy precisely one hundred shares and you by no means have to follow through on the deal.
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.
The second category of stock options trading is called put options. Buying a put option gives you the ability to sell one hundred stocks at a predetermined strike price. This may be difficult to understand at first as it somewhat contradictory to traditional stock 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.
To conclude, there is money to be made in options trading if you know what youare doing and have the ability to consult with somebody knowledgeable. Learning the ins and outs of options trading well can position you to profit nicely.
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.
You would buy what is called a call option which gives you the right to purchase a companyas stock. The major difference with this is that you buy precisely one hundred shares and you by no means have to follow through on the deal.
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.
The second category of stock options trading is called put options. Buying a put option gives you the ability to sell one hundred stocks at a predetermined strike price. This may be difficult to understand at first as it somewhat contradictory to traditional stock 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.
To conclude, there is money to be made in options trading if you know what youare doing and have the ability to consult with somebody knowledgeable. Learning the ins and outs of options trading well can position you to profit nicely.
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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