Learn The Basics of Options Trading at Options University
Interested to pursue a career in options trading? If you are, let Options University handle your options trading education. If you are familiar with stocks or bonds trading, dealing with options is quite similar.
If you are just learning the ropes of options trading, understanding the term can be tricky and challenging at first. In a nutshell, an option is a contract that makes you eligible to buy (call) or sell (put) a stock or bond at a fixed cost (strike price) on or before a certain date (the expiration date).
There is a wide range of options you can choose from in the marketplace. With the American type, you can exercise your option on the purchase and the expiration. European options gives you the option to buy or sell only on the date of expiration. Although geographical in nature, buying options is not an indication that you have purchased a certain kind of option. As a rule of the thumb, American options are applicable to stocks and bonds while European options are for indexes.
Officially, options end on the Saturday after the third Friday of the month of expiration of the contract. However, the effective expiration day of the contract is on Friday as US markets are closed on a Saturday.
When buying or selling an option, you basically have a couple of alternatives-hold the option until it matures or exercise it before the expiration date. A huge percentage of investors prefer the former before the latter. Let us take a look at one scenario:
Supposed you buy at $1 with a strike price of $25. Since options contracts are good for 100 share lots, buying options would be worth $100 and you are eligible to buy $2500 worth of stock using the option. If the option expires and the value of the stock costs $27, buying would be a sensible move since the strike price is only $25. This translates to an immediate earnings of $2.
Another scenario would be if the cost of the share does not hit $27 or the breakeven point of $26. What you can do is exercise the option in order to avoid losing any share.
If the cost of the share is below $26, you can still make a put option for a reduced amount than what you paid and then recover some of your losses.
If the option has already lost its value, you can simply let the contract expire while hoping that the cost would soar again. However, you should be resigned to the fact that your $100 is already lost. Fortunately for you, options is only applicable for buying or selling and does not bind you to do either once your contract expires. Thus, your potential risk is limited to the price that you paid for the option at the onset.
However, you need to be aware that the price of the option is not only dictated by the movement of the price of underlying assets but also its expiration date. As the date of expiration draws near, the price of the option tends to slowly drop. So if you do not intend to hold an option until its expiration, it may be worthwhile selling it earlier than the expiry date.
Learning the basics of trading options can be easy when you let Options University teach you the ropes of the business.
Options Trading 101 From Options University
If you have been into stock trading and would like to venture into something more speculative, then options trading may be the right one for you. At Options University, you will learn the basics of how to trade options.
At its most basic, trading options on the stock exchange means a right. It involves providing the right to buy or sell certain stocks at a given price during a specific time. Buying an option is known as call while selling it is called put. Combining the put and call is called a double option.
If you are just a beginner with trading options, this can be a littler challenging since there are plenty of options to trade and a wide array of methods for trading options. However, the key to becoming successful in implementing options trading strategies is determination. It is all a matter of determining your ultimate goal and what you aim to accomplish.
Another confusing and challenging aspect of trading options is understanding the jargon. As soon as you have developed an understanding of these technical terms, you will realize that all that is needed is to have an understanding of where the prices of the stock is headed in the near future.
When you already have knowledge of predicting what will happen, the next thing to do is to pick the right option trade that will give you the most benefit. For instance, if you think that the cost of the stock would increase, then you can make a call option. This would allow you to purchase at a reduced price, and sell at a higher cost at a later time.
Trading would be effective if the price of the stock would increase. On the other hand, you could end up with limited options. With options trading, it works the other way around. You purchase options when you predict that the prices of the stock are going to drop. In both instances, you exercise your right on the option by paying a certain fee to the person selling the option.
The premium you pay is called the option money. If the market is moving against you, the only money that will be lost is the option price. The major advantage of options trading is that your losses will always have a certain limit.
Options trading is suitable if you do not want to invest huge amounts of capital but still want to utilize minimal amount of money to benefit from varying prices. If you have been involved in the stock market, venturing into options trading can be much easier for you. Making calm decisions during pressure packed situations will not be any problem for you.
Engaging in options trading can provide mental as well as financial rewards. However, to become a successful options trader and make your trading experience worthwhile, you must be diligent in conducting your research and express your willingness to consistently expand your understanding of options trading.
Becoming an options trading affiliate can likewise provide you with opportunities to have a regular stream of income. There are many programs out there that can help you make money as an affiliate.
Options University offers one of the highest commissions in the industry at 35%. It is hailed as the second fastest growing options education company by Inc Magazine.
