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Home > Options |
Option Trading: Options are one of the most versatile trading instruments ever invented. Since option purchases cost less than buying the underlying stock, they are a high leverage approach to trading that can considerably limit the overall risk of a trade or provide additional income. Simply stated, option buyers have rights and option sellers have obligations. Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of the expiration month. More...
Puts and Calls: An option is a contract that gives the holder, for a stated period, certain rights with regard to the underlying security of that option (options are available based on stocks, stock indices, commodities, currencies, even interest rates). There are two types of options: calls and puts. For simplicity's sake, we will discuss options in terms of stocks, as these options are the oldest and best known. More...
Trading Spreads and Straddles: A bear spread is an option strategy where a call is purchased and a call of a lower strike price on the same stock is sold. Both calls must have the same expiration date. A bear spread can also be established by using put options, in which one put is purchased and another put with a lower strike price is sold. Again, both strikes must have the same expiration date. These option strategies are called "bear spreads" because they are used by traders who are bearish on a stock, yet want limited risk. Bear spreads may require higher commissions since they involve buying or selling multiple positions. More...
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