Learning More About the Options Action

For those unfamiliar with Trading, Options Trading is a form of financial trading that has been around almost as long as the exchange itself. This form of trading means you are buying a certain stock, at a certain price, and in return you will be able to sell that same stock for a profit at a later date. The great thing about Trading is that, it can be done on a 24 hour basis and there is no physical product involved. In this article we are going to take a look at the Options Action, where Trading in Options, in a more detailed term, is discussed.

First we will examine the Basics. When you enter Trading, what you are actually doing is purchasing an Position. This can be defined as, “you are buying a right (usually an option) to purchase a commodity at a particular price in the future.” The underlying assets can be metals, stocks, currencies or futures. With Options Trading you can actually gamble on the price movements of these commodities, depending on how much pressure you wish to apply.

Options can be either call or put, depending on your choice. If you choose to call an option, this means you are purchasing the right (although not necessarily the actual commodity being bought) and then you are giving the seller the right to sell that commodity at a later date. Options are used as a way to hedge a portfolio against loss of income from volatile market prices.

To exercise Options, you must first determine when exactly the market price is likely to change. For Options trading, this means you need to check the Options News and Viewing sections of various exchanges. There you will find current pricing for Options. You should try to identify bullish or bearish trends. Options’ price tends to move in a pattern called a Trend. A bullish trend is characterized by a rising price, over a set period of time, and a period of time when the price is close to the trading expiry point.

A bearish trend is represented by a falling price. An trader hoping to exercise an option during a bearish period should buy the options when it is low. Once an option reaches its expiry date, the price starts to rise. The trader must then sell the option at a high price to obtain a profit.

It is important to remember that when an trader wants to buy or sell an option, the contract itself needs to be valued with respect to the current market price. If the price of the contract is higher than the strike price, they have purchased a Call option. Conversely, if the price is lower than the strike price, they have sold a Hold option. The most common options actions are the buy and sell of call options and the write or reverse of a put option.