Options Trading Basics
New to Options? Want to trade option? This is the first step for you.
You many know many wealthy individuals make lots of money using options and you can try too.
Stock and Bond trading strategies run the gamut from the simple ‘buy and hold forever’ to the most advanced use of technical analysis. Options trading has a similar spectrum.
Options are a contract conferring the right to buy (a call option) or sell (a put option) some underlying instrument, such as a stock or bond, at a predetermined price (the strike price) on or before a preset date (the expiration date).
So-called ‘American’ options can be exercised anytime before expiration, ‘European’ options are exercised on the expiration date. Though the history of the terms may lie in geography, the association has been lost over time. American-style options are written for stocks and bonds. The European are often written on indexes.
Options officially expire on the Saturday after the third Friday of the contract’s expiration month. Few brokers are available to the average investor on Saturday and the US exchanges are closed, making the effective expiration day the prior Friday.
With some basic terminology and mechanics out of the way, on to some basic strategies.








