At first glance, options can seem like a very challenging investment option to consider. In essence, an option is a contract that allows the buyer to choose to buy or sell at a specific price or on or before a stated date. The process of buying is a call, and the process of selling is done in the case of a put. Buying and selling of options is done through a brokerage investment account.
The option is not the asset itself but rather the value of the asset at a specific point in time. For this reason, options are also known as derivatives. Most of the underlying assets are blocks of 100 shares of a stock. However, there can also be options that are derivatives of commodities, currencies, or bonds.
Options are a good addition to any investment portfolio. They are easy to get into and out of, with the ability to withdraw at any time. In addition, as they are not the ownership of the underlying asset, they are a lower-risk level investment. The nature of options is speculative, with the opportunity to add significantly add to your income with well-researched and strategic call and put options based on the market.
The Basics of Options Trading
All options are based on future events. The key is to time the call as the underlying asset increases in prices without waiting until the end of the expiry of the contract, where there is little opportunity for upward movement.
Volatility is another factor the determines the price of an option. The more volatile the underlying asset, the greater the chance of a large increase in the option, with the potential for downward movement as well.
There are both short-term and long-term options. Short-term options are typically set to expire within 12 months, with long-term options expire outside of that 12-month period.
For more information on stock options trading from Trade Genie, get in touch today.