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Online_trading_stocks_and_options |
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In order to understand what is "options trading" we must get into basic understanding of stock options. What are Stock Options? It is a contract between a seller and a buyer that gives the buyer of the contract the authority, but he is not obliged, to act on the contract before the expiry of the contract or before its due date in order to sell or buy the given stock at a previously agreed price. How do the stock options work? Take for instance that you have bought the stock option for the right to buy the shares of ABC company at say 10$. This means that in future if the stock price of the ABC company goes up to 100$ and you have the right to buy the shares of that company for mere 10$ ( tables can turn the other way around, but lets see the brighter part of it). We must keep in mind that buying a stock option is not the same as buying a stock of that company. It merely gives you the right to buy that stock share before the expiration of the contract. Expiry of Stock Option: Well the honeymoon period doesn't last |
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