| For most of us, when we hear the words stock | | | | the call option. When a trader purchases a put option, |
| option trading, we automatically think of shares of | | | | he is required to pay a fee to the person selling him |
| stock being purchased and sold on the Stock | | | | the option, often quite a hefty one at that. This fee |
| Exchange, but in actuality stock option trading is | | | | is referred to as option money. If the person who |
| something completely different from that. For those | | | | purchased the option doesn't use it, he only will lose |
| of us not too familiar with the ins and outs of trading | | | | the fee, or option money, that he was required to |
| and the stock market, when you trade an option, | | | | pay for the original put option. |
| you are trading a right to a stock. That right then | | | | Oftentimes, a smart trader can use put options to |
| gives the owner the authority to purchase or sell a | | | | secure their own funds, and sometimes, make a |
| certain stock within a set amount of time, for a | | | | great profit for themselves in the meantime. Keep in |
| pre-determined price. Not only are rights to securities | | | | mind, that anytime you invest money in stocks or |
| and stocks sold in this manner, but government | | | | options, you do stand a chance of losing those funds, |
| bonds, foreign currency, and stock indexes also use | | | | so you should only trade with money that you can |
| option trading. | | | | afford to lose. Don't use your mortgage money, or |
| If the option being traded is a right to buy securities, | | | | your child's school fees to play on the stock market, |
| you may hear it referred to as a call option. A put | | | | it's just not a wise thing to do, especially if you don't |
| option is a right to sell those securities only, with no | | | | have a clue to what you're doing. Make sure you |
| buy option. If you hear the term double option, it is a | | | | have a good solid trading foundation and education |
| combination of a call option and a put option, which | | | | before you take the plunge. Some good ways to |
| gives the owner to power to both buy and sell the | | | | better educate yourself on the workings of stock |
| securities. Call options are usually used for securities | | | | option trading, is to invest in stock and option trading |
| that are thought to gain in value in the near future. | | | | products, such as ebooks, magazines, stock trading |
| For traders, call options give them the power to get | | | | sites, or even go for a well recommended trading |
| a rising stock locked in at a low price, so that they | | | | seminar. |
| can turn around and then sell that stock for a nice | | | | Options' trading is a good way to cover yourself |
| profit, assuming that the value rises as predicted. | | | | from major losses, in the event you make a bad |
| If for some reason the value of the stock fails to | | | | choice or call on a particular stock or investment. |
| rise as expected, then the trader is not required to | | | | Many people are also now starting to participate in |
| make any purchase, thus protecting his funds. | | | | online options trading as well, which makes it easier |
| Traders often use put options when a certain stock | | | | and faster, since it can all be done right from your |
| is thought to be falling in value, just the opposite of | | | | home computer. |