investing in options, an OMG Moment!

stocks except for the fact that you are only buying the right to buy or sell and not the actual stocks themselves.

Buying a call option gives you the ability to purchase one hundred stocks at a predetermined price, known as the strike price. However, keep in mind that you do not have to exercise the option if it is not in your favour.

Once you have purchased a call option, you then can decide if and when you want to exercise your right to buy. You have a specific deadline in which to buy. If you decide to purchase the stocks, they are bought at the predetermined price.

The second category of stock options trading is called put options. Buying a put option gives you the ability to sell one hundred stocks at a predetermined strike price. This may be difficult to understand at first as it somewhat contradictory to traditional stock trading.

Usually, people will buy put options when they think the price of the stock will go down. This allows them to sell at a predetermined price even if the stock value goes below that price. Put options are a good way to mitigate the risk of your stocks going down in value.

So, consider your options (no pun intended) when you look at the difference between things like futures and options trading. If you know how to do it correctly, options trading systems can be well worth the money and effort put into it. - 16546

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