Stock options 101 video

Stock Options The Basics

 

stock options 101 video

To master the basics of Options, you really need all three courses. Stock and Options combo strategies To easily understand or remember this complexity, we've created a 4-strategies Box. Also included is a video on how Options can be a much more capital-efficient instrument than Stocks. The four strategies BOX - Call and Put Options /5(K). Stock option agreements function exactly the same. But, instead of land, the underlying security is stocks in a traded company. The option contract guarantees the owner owner will sell the stocks to the buyer at an agreed price (strike price), within an agreed time. In the case of stock options there is a fee for granting the option. A stock option contract typically represents shares of the underlying stock. Call and Put Options. Call Option Basics. Put Option Example. Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their.


Essential Options Trading Guide


The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type. Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option. This is because the early exercise feature is desirable and commands a premium. Or they can become totally different products all together with "optionality" embedded in them.

Again, exotic options are typically for professional derivatives traders. Short-term options are those that expire generally within a year. LEAPS are identical to regular options, they just have longer durations.

Options can also be distinguished by when their expiration date falls. Sets of options now expire weekly on each Friday, at the end of the month, or even on a daily basis.

Index and ETF options also sometimes offer quarterly expiries. Reading Options Tables More and more traders are finding option data through online sources. While each source has its own format for presenting the data, the key components generally include the following variables: Volume VLM simply tells you how many contracts of a particular option were traded during the latest session.

The "bid" price is the latest price level at which a market participant wishes to buy a particular option, stock options 101 video. The "ask" price is the latest price offered by a market participant to sell a particular option. Open interest decreases as open trades are closed. Gamma GMM is the speed the option is moving in or out-of-the-money. Gamma can also be thought of as the movement of the delta.

Theta is the Greek value that indicates stock options 101 video much value an option will lose stock options 101 video the passage of one day's time. This position profits if the price of the underlying rises fallsand your downside is limited to loss of the option premium spent. You would enter this strategy if you expect a large move in the stock but are not sure which direction.

Basically, you need the stock to have a move outside of a range. A strangle requires larger price moves in either direction to profit but is also less expensive than a straddle, stock options 101 video. They combine having a market opinion speculation with limiting losses hedging. Spreads often limit potential upside as well. Yet these strategies can still be desirable since they stock options 101 video cost less when compared to a single options leg.

Vertical spreads involve selling one option to buy another. Generally, the second option is the same type and same expiration, but a different strike. The spread is profitable if the underlying asset increases in price, stock options 101 video the upside is limited due to the short call strike, stock options 101 video.

The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one. Why not just buy the stock? Maybe some legal or regulatory reason restricts you from owning it. But you may be allowed to create a synthetic position using options. In a long butterfly, stock options 101 video, the middle strike option is sold and the outside strikes are bought in a ratio of buy one, sell two, buy one.

If this ratio does not hold, it is not a butterfly. The outside strikes are commonly referred to as the wings of the butterfly, and the inside strike as the body. The value of a butterfly can never fall below zero. Below is a very basic way to begin thinking about the concepts of Greeks: Using the Greeks to Stock options 101 video Options Conclusion Options do not have to be difficult to understand once you grasp stock options 101 video basic concepts.

Options can provide opportunities when used correctly and can be harmful when used incorrectly. Related Articles.

 

Options: The Basics | The Motley Fool

 

stock options 101 video

 

To master the basics of Options, you really need all three courses. Stock and Options combo strategies To easily understand or remember this complexity, we've created a 4-strategies Box. Also included is a video on how Options can be a much more capital-efficient instrument than Stocks. The four strategies BOX - Call and Put Options /5(K). Stock option agreements function exactly the same. But, instead of land, the underlying security is stocks in a traded company. The option contract guarantees the owner owner will sell the stocks to the buyer at an agreed price (strike price), within an agreed time. In the case of stock options there is a fee for granting the option. A stock option contract typically represents shares of the underlying stock. Call and Put Options. Call Option Basics. Put Option Example. Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their.