Stock Market Trading
- Options give you the right to buy or sell a security.
- If you a buyer you have the right to buy or sell the underlying security at a specified price.
- An option seller you have the obligation before a buyer.
- There are two type of options:
- calls - give you the right to buy the underlying security.
- puts - give you the right to sell the underlying security.
- Each option corresponds to 100 shares of underlying security.
- The price of options depend on several factors:
- current price of the underlying security
- strike price of the option
- time remaining until expiration
- Strike Price. The price at which an underlying security can be purchased or sold if the option is exercised.
- Expiration Date. The date the option expires (3rd Friday of the expiration month). Each option has an expiration day and after that date you lose your right to buy or sell the underlying security at the specified price.
- Premium. The price of the options. If option costs $3 then total premium is $300 (100 shares).
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