How To Profit From Stock Options
Investing in the stock market is very tricky, especially if you are new to investing. If you have access to an experienced trader, the learning curve can be much easier. Options trading is more difficult to learn than standard trading.
Option trading is much more advanced in the whole scheme of the investing industry. However this article will try to give you the basic on the process so that you can make a decision for yourself whether or not you want to pursue this tactic.
To begin with, there are two categories for options trading. These are similar in concept to buying and selling stocks except that they are far more intricate. The two categories of options trading are called 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 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.
Option trading is much more advanced in the whole scheme of the investing industry. However this article will try to give you the basic on the process so that you can make a decision for yourself whether or not you want to pursue this tactic.
To begin with, there are two categories for options trading. These are similar in concept to buying and selling stocks except that they are far more intricate. The two categories of options trading are called 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 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 option trading course for beginners to experts.
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