Introduction Of Options Trading Selden NY

There are two types of option contracts Call options and Put options. A Call option gives the buyer the right to buy the underlying asset, while a Put option gives the buyer the right to sell the underlying asset.

Local Companies

Mr. Robert McDermott, CFP®
(631)414-0094
110 Marcus Blvd Ste 300
Hauppauge, NY
Mr. Scott Fitzgerald, CFP®
(631)845-5100 (3834)
445 Broad Hollow Road
Melville, NY
David Frisch
Frisch Financial Group, Inc.

(631) 271-7900
290 Broad Hollow Road, Suite 130E
Melville, NY
Cary Carbonaro
Stonegate Wealth Management, LLC

646-388-1460
7 Platt Place
Huntington, NY
Ronald Roge
R.W. Roge & Company, Inc.

(631) 218-0077 Ext: 210
630 Johnson Avenue, Suite 103
Bohemia, NY
Mr. Anthony Sce III, CFP®
631-563-8433
515 Johnson Ave
Bohemia, NY
Mr. Ted Shapses, CFP®
(631)425-9616
25 Fort Hill Dr
Lloyd Harbor, NY
Mr. Pat Ingrassia, CFP®
631-265-1400 (270)
45 Thompson Hay Path
Setauket, NY
Gerard Barrasso
United Financial Planning Group, LLC

(631) 234-0871
888 Veterans Memorial Highway, Suite 530
Hauppauge, NY
Joyce Streithorst
Frisch Financial Group, Inc.

(631) 271-7900
290 Broad Hollow Road, Suite 130E
Melville, NY
Data Provided by:
    

An option contract is an agreement between two parties to buy/sell an asset (In this case, the asset refers to stock) at a certain price and specific date.

It is called an option because the buyer is not obliged to carry out the transaction. If, over the life of the contract, the asset value decreases, the buyer can simply elect not to exercise his/her right to buy/sell the asset.

There are two types of option contracts Call options and Put options. A Call option gives the buyer the right to buy the underlying asset, while a Put option gives the buyer the right to sell the underlying asset.

A simple example: Peter buys a Call option contract from Sarah. The contract states that Peter will buy 100 Microsoft shares from Sarah on the 5th May for $25. The current share price for Microsoft is $30.

Note: this is an example of a Call option as it gives Peter the right to buy the underlying asset.
If the share price of Microsoft is trading above $25 on the 5th May, then Peter will exercise the option and Sarah will have to sell him Microsoft shares for $25. With Microsoft trading anywhere above $25 Peter can make an instant profit by taking the shares from Sarah at the agreed price of $25 and then selling the shares on the open market for whatever the current share price is and making a profit.

The $25 value, which is stated in the agreement, is referred to as the Exercise (or Strike) Price. This is the price at which the asset will be exchanged.
The date (in this case 5th May) is known as the Expiry (or Maturity) Date. This date is the deadline for the option contract. At this date, the option buyer is to decide if a transaction of the underlying asset is to occur.

Outcomes: Let s imagine that at the expiration date, Microsoft is trading at $30, then Peter will buy the shares from Sarah at the agreed $25 and then he can sell them back on the open market for $30 and make an instant $5.

Alternatively, if Microsoft is trading at $20, then buying the shares from Sarah at $25 is too expensive as he can buy them on the open market for $20 and save $5. In this situation, Peter would choose not to exercise his right to buy the shares and let the options contract expire worthless. His only loss would be the amount that he paid to Sarah when he bought the contract, which is called the Option Premium more on that a little later. Sarah would, however, keep the option premium received from Peter as her profit.

All in all, there are more than 50 strategies you can deploy in options trading by combining many different strike prices and expiration. But do you need to know all?

The good news is you do not have to!In fact, most of them allow you to make money very slowly or limited.

Related Articles
- Mechanical Forex Trading Profits Selden NY
Most novice Forex traders want to make money using mechanical Forex trading systems but most lose money, as most systems lose. This article is all about finding the right system and trading it for long term currency trading success.
- Leaning Forex Trading Online Selden NY
- Day Trading for a Living Selden NY
- How to Use Stop Losses in Swing Trading Selden NY
- Trading Stock Options Selden NY
- Forex Education Selden NY
- Forex Day Trading Strategies Selden NY
- Forex Trading Advice Selden NY
- Forex Trading Education Program Selden NY
- Forex Trading Success Selden NY