Magazine – Option Trader Magazine (optionstradermag.com)

Magazine – Option Trader Magazine (optionstradermag.com)

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WHAT EXACTLY ARE OPTIONS?

In the world of trading, options are exactly what their name implies. They represent a right to buy or sell shares of a certain stock.

As in any trade, options require two parties. Someone needs to sell the shares and someone needs to buy the shares.

Sometimes, selling is referred to as writing. The company associated with the underlying stock is not involved in the transaction at all. Ultimately, trade options occur when one party purchases the option to either buy or sell stock shares at an agreed upon price by a certain expiration date.

CALL OPTION AND PUT OPTION

A call option places choice on the buyer and obligation on the seller. Someone might buy the right to purchase shares in Company A for $22 each for the next two months. No matter what the market does, the seller is obligated to sell those shares at that price if the buyer exercises his or her option.

A put option occurs when someone buys the right to sell shares at a certain price. If that person decides to exercise the option to sell, then the buyer is obligated to buy at the contract price.

WHY BUY OPTIONS?

Options are an investment entered into by traders who think they have a better understanding of the market than someone else. For example, in a call option, the buyer believes there is a chance that the share price will increase before expiration date, so he or she locks in the chance to purchase at the current price. Obviously, the seller agrees to this option because he or she believes the stock will remain consistent or devalue before expiration date.

OPTIONS STRATEGIES

Options can be combined into strategies that expose the trader to less risk. Some common trading strategies include vertical spread, butterfly spread, and debit spread. In a vertical spread, a trader options to buy stock at a certain price and to sell stock based on the same security at a different price. If the stock currently trades at $10 and the trader has 100 shares, he might option to sell those shares for $10. He might also option to buy shares from someone else for $8. If both options go through, regardless of share price at the time, he has made a profit.

Most experts recommend that beginners become educated before getting involved with options. Although trades can be constructed where there is a very good chance of profit, there can also be a high risk associated with options trading especially for someone who doesn’t understand what they are doing.

Bond -Stock Trading course: Learn about Bond -Stock Trading

Bond trading definition
Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds.
Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.

A bond is a financial instrument that works by allowing individuals to loan cash to institutions such as governments or companies.
The institution will pay a defined interest rate on the investment for the duration of the bond, and then give the original sum back at the end of the loan’s term.

A stock trader or equity trader or share trader is a person or company involved in trading equity securities.
Stock traders may be an agent, hedger, arbitrageur, speculator, stockbroker.
Such equity trading in large publicly traded companies may be through a stock exchange.
Stock shares in smaller public companies may be bought and sold in over-the-counter (OTC) markets.

Stock traders can trade on their own account, called proprietary trading, or through an agent authorized to buy and sell on the owner’s behalf.
Trading through an agent is usually through a stockbroker. Agents are paid a commission for performing the trade.

Major stock exchanges have market makers who help limit price variation (volatility) by buying and selling a particular company’s shares on their own behalf and also on behalf of other clients.

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