STOCK OPTIONS BASICS stock options training. options trading, learning to trade calls, puts, options spreads, options expiration,Collar trades, Bull Put, Bull Call,
Stock Options Basics
stock options, options trading, calls, puts, options spreads, options expiration,Collar trades, Bull Put, Bull Call,
stock options, options trading, calls, puts, options spreads, options expiration,Collar trades, Bull Put, Bull Call,
stock options basics, calls, puts, collar trades, volatility, vix, in the money, out of the money, at the money, spread trades, risk, option strategies, calendar spread, credit spread,debit spreads,,portfolio stock, short stock, market direction, bear market, bull market, market trend, graphs, bid, ask
I will begin by sharing some of what I experienced when I first began learning to trade the options market. And what an
experience it has been!!
Options learning tools such as these have made the task a lot easier.
(For more information click on this image)
I have always been interested in trading the stock markets but did not have a clue as to how to begin. The only exposure I had ever had to the markets was through a co-worker friend whose brother in law was an experienced trader.
We bought and sold a few times and may have made a few gains and losses over a period of times. We once bought some penny stock that never increased in value beyond what we initially invested, the companies eventually went broke and years later we wrote them off as worthless on our income taxes.
I learned that there are investors of all types, conservative, speculative, long term, short terms, and day traders. As you learn to trade it is important to spend time learning which category that best suits your type, whether you trade the stock market or the options markets.
Options are traded as a derivative of the underlying stock and can be purchased at a fraction of the cost. Some experts say that most options prices are less than one-tenth the price of the underlying stock.
My initial interest in learning to trade the options markets was the fact that options trading is a fraction of the cost to trade the underlying stock. And also the ability to hedge the trade against losses.
My big mistake was not getting a clear understanding of the options trading concepts and how they work before diving into the more advanced spread trading strategies.
Therefore, the first thing I would advise anyone who may be looking into learning these concepts of option trading is to begin at the beginning.
I will introduce you to some basic options concepts here in this website and more advanced strategies and some examples of how options are structured in my blogs, squidoo and my ebook.
Some of these basic topics are:
1) What is an option?
2) How do they work.
3) How does trading an option
differ from trading a stock.
4) How are they priced.
5) What is a call option.
6) What is a put option.
7) Option strike price.
8) Buying and selling of options.
9) What is the premium.
10) The ask and the bid.
10) Expiration day.
Information
I will begin by sharing some of what I experienced when I first began learning to trade the options market. And what an
experience it has been!!
Options learning tools such as these have made the task a lot easier.
(For more information click on this image)
I have always been interested in trading the stock markets but did not have a clue as to how to begin. The only exposure I had ever had to the markets was through a co-worker friend whose brother in law was an experienced trader.
We bought and sold a few times and may have made a few gains and losses over a period of times. We once bought some penny stock that never increased in value beyond what we initially invested, the companies eventually went broke and years later we wrote them off as worthless on our income taxes.
I learned that there are investors of all types, conservative, speculative, long term, short terms, and day traders. As you learn to trade it is important to spend time learning which category that best suits your type, whether you trade the stock market or the options markets.
Options are traded as a derivative of the underlying stock and can be purchased at a fraction of the cost. Some experts say that most options prices are less than one-tenth the price of the underlying stock.
My initial interest in learning to trade the options markets was the fact that options trading is a fraction of the cost to trade the underlying stock. And also the ability to hedge the trade against losses.
My big mistake was not getting a clear understanding of the options trading concepts and how they work before diving into the more advanced spread trading strategies.
Therefore, the first thing I would advise anyone who may be looking into learning these concepts of option trading is to begin at the beginning.
I will introduce you to some basic options concepts here in this website and more advanced strategies and some examples of how options are structured in my blogs, squidoo and my ebook.
Some of these basic topics are:
1) What is an option?
2) How do they work.
3) How does trading an option
differ from trading a stock.
4) How are they priced.
5) What is a call option.
6) What is a put option.
7) Option strike price.
8) Buying and selling of options.
9) What is the premium.
10) The ask and the bid.
10) Expiration day.
What is an Option???
stock options basics, calls, puts, collar trades,
volatility, vix, in the money, out of the money, at the money, spread
trades, risk, option strategies, calendar spread, credit spread,debit
spreads,,portfolio stock, short stock, market direction, bear
market, bull market, market trend, graphs, bid, ask
The property can be stocks, exchange traded funds, (ETF) or other financial products. In our discussions we will concentrate on stock options.
The buyer or seller of the options contract looses their investment if the option contract is not acted upon by the set date.
There are two types of options, calls and puts, either type can be bought or sold depending on what the investor expects to accomplish.
Buying and selling options are referred to as long and short. To buy an option contract is said to long the option. To sell an option contract is said to short the option.
A Long call option, gives the investor the right to buy the underlying stock at the set price, called the strike price, on or before the set date, called the expiration day.
A Long put option, gives the investor the right to sell the underlying stock at the set price on or before the expiration day.
The purchase price of the option is called the premium. The premium has two parts:
The intrinsic value is the amount by which the option is in the money.
The extrinsic value is the price of the option (premium) minus the intrinsic value.
Options are bought and sold at either the ask or the bid price.
The ask price is the price the seller wants to receive for the option, and is what the buyer must pay. The bid price is the price the buyer is willing to pay for the option and is what the seller receives.
Options are bought or sold in contracts. Each contract represents 100 shares of stock.
Because options are a derivative of the underlying stock, as the price of the stock fluctuates, the bid/ask price of the option changes as well.
The expiration day for options is the Saturday following the third Friday of the month. But because the stock market is closed on Saturday, the third Friday is referred to as Expiration Friday.
The option strike price is the level at which the investor can exercise the option. Strike prices are referred to as in the money (ITM), at the money (ATM) and out of the money (OTM).
A call option is ITM when the stock price is higher than the strike price and OTM when the strike price is higher.
A put option is ITM when the stock price is lower than the strike price and OTM when the stock price is higher.
If the price of the stock and the strike price is the same, it is ATM.
Terminology
An option is a contract that gives the buyer the right to buy or to sell a property at an agreed upon price by a set date in the future, and it obligates the seller to fulfill the rights of the buyer. You are not buying the property itself, but the option to buy it. It is the right to control the underlying stock without owning it.The property can be stocks, exchange traded funds, (ETF) or other financial products. In our discussions we will concentrate on stock options.
The buyer or seller of the options contract looses their investment if the option contract is not acted upon by the set date.
There are two types of options, calls and puts, either type can be bought or sold depending on what the investor expects to accomplish.
Buying and selling options are referred to as long and short. To buy an option contract is said to long the option. To sell an option contract is said to short the option.
A Long call option, gives the investor the right to buy the underlying stock at the set price, called the strike price, on or before the set date, called the expiration day.
A Long put option, gives the investor the right to sell the underlying stock at the set price on or before the expiration day.
The purchase price of the option is called the premium. The premium has two parts:
The intrinsic value is the amount by which the option is in the money.
The extrinsic value is the price of the option (premium) minus the intrinsic value.
Options are bought and sold at either the ask or the bid price.
The ask price is the price the seller wants to receive for the option, and is what the buyer must pay. The bid price is the price the buyer is willing to pay for the option and is what the seller receives.
Options are bought or sold in contracts. Each contract represents 100 shares of stock.
Because options are a derivative of the underlying stock, as the price of the stock fluctuates, the bid/ask price of the option changes as well.
The expiration day for options is the Saturday following the third Friday of the month. But because the stock market is closed on Saturday, the third Friday is referred to as Expiration Friday.
The option strike price is the level at which the investor can exercise the option. Strike prices are referred to as in the money (ITM), at the money (ATM) and out of the money (OTM).
A call option is ITM when the stock price is higher than the strike price and OTM when the strike price is higher.
A put option is ITM when the stock price is lower than the strike price and OTM when the stock price is higher.
If the price of the stock and the strike price is the same, it is ATM.
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Every contract consists of a buyer and a seller, (winner and a loser) and the broker. One investor believes a stock will go up and buys a call, another believes it will go down and buys a put. If the stock moves up the call buyer is ITM and the put buyer is OTM. If the stock moves down it is moving OTM for the call buyer and ITM for the put buyer.
Hey Joe, The market is up should I buy or sell? Well Sam
you don't make money until you close the trade!
___________Every contract consists of a buyer and a seller, (winner and a loser) and the broker. One investor believes a stock will go up and buys a call, another believes it will go down and buys a put. If the stock moves up the call buyer is ITM and the put buyer is OTM. If the stock moves down it is moving OTM for the call buyer and ITM for the put buyer.
Hey Joe, The market is up should I buy or sell? Well Sam
you don't make money until you close the trade!
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