Option Trading |
Some Basics Of Call Options
The two types of options are calls and puts. When you buy a call option, you
have the right but not the obligation to purchase a stock at the strike price
any time before the option expires
The price of an option is called its premium. The buyer of an option cannot
lose more than the initial premium paid for the contract, no matter what
happens to the underlying security. So, the risk to the buyer is never more
than the amount paid for the option. The profit potential, on the other hand, is
theoretically unlimited
When the strike price of a call option is above the current price of the stock,
the call is out of the money and when the strike price is below the stock
price it is in the money.
Options officially expire on the Saturday following the third Friday of the
expiration month. But, in practice, that means the option expires on the third
Friday
Trading options is very different from trading stocks, stock traders should
take the time to understand the terminology and concepts of options before
trading them
______________
Directional Trading:
When most stock traders first begin using options, it is usually to purchase
a call or a put for directional trading, which traders practice when they are
confident that a stock price will move in a particular direction and they open
an option position to take advantage of the expected movement
Stock trading Vs Option trading:
These traders may decide to try investing in options rather than the stock
itself because of the limited risk, high potential reward and smaller amount
of capital required to control the same number of shares of stock
If your outlook is positive (bullish), buying a call option creates the
opportunity to share in the upside potential of a stock without having to risk
more than a fraction of its market value
Back..
Option simple calculation
The two types of options are calls and puts. When you buy a call option, you
have the right but not the obligation to purchase a stock at the strike price
any time before the option expires
The price of an option is called its premium. The buyer of an option cannot
lose more than the initial premium paid for the contract, no matter what
happens to the underlying security. So, the risk to the buyer is never more
than the amount paid for the option. The profit potential, on the other hand, is
theoretically unlimited
When the strike price of a call option is above the current price of the stock,
the call is out of the money and when the strike price is below the stock
price it is in the money.
Options officially expire on the Saturday following the third Friday of the
expiration month. But, in practice, that means the option expires on the third
Friday
Trading options is very different from trading stocks, stock traders should
take the time to understand the terminology and concepts of options before
trading them
______________
Directional Trading:
When most stock traders first begin using options, it is usually to purchase
a call or a put for directional trading, which traders practice when they are
confident that a stock price will move in a particular direction and they open
an option position to take advantage of the expected movement
Stock trading Vs Option trading:
These traders may decide to try investing in options rather than the stock
itself because of the limited risk, high potential reward and smaller amount
of capital required to control the same number of shares of stock
If your outlook is positive (bullish), buying a call option creates the
opportunity to share in the upside potential of a stock without having to risk
more than a fraction of its market value
Back..
Option simple calculation
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