Candlestick Trading Blog
June 28, 2009
Option Trading
| Option trading deals with options contracts that give the buyer the right but not the obligation to buy or sell an underlying asset at a set price on or before a specific date. In today's article we provide a list of facts about trading options as well as the different options strategies available to investors. • Options are derivatives since they derive their value from an underlying asset. • Options markets include four different participants. These include buyers of calls, buyers of puts, sellers of calls, and sellers of puts. • Calls give the holder the right to buy an asset at a specific price within a specific set amount of time and puts give the holder the right to sell an asset at a set price within a specific period of time. • Stock options contracts represent 100 shares of the underlying stock. • The total cost of an option is referred to as the premium, which is determined by factors including the strike price, the stock price, and the time that remains until the options contract expires. • Buyers are typically referred to as holders and sellers are typically referred to as writers. • There are two main classifications of options known as American and European. • The strike price is the price at which the underlying stock can be purchased or sold when stock option trading. • Investors will use stock options when speculating and hedging. • Long-term options are known as LEAPS. There are several option trading strategies including bullish, neutral and bearish option strategies. We list them below. Bullish Strategies • Buying Calls • Selling Calls • Bull Call Spread • Bull Put Spread Bearish Strategies • Buying Puts • Selling Calls • Bear Call Spread • Bear Put Spread • Put Hedge Neutral Strategies • Selling Covered Calls • Sell Straddle • Sell Strangle • Calendar Spread There is a lot to learn when learning about online options trading. Continue to research and learn more about options, take online courses, attend seminars, and join online forums. It is important to meet others who practice trading options as well. Find out if online options trading is right for you. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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