Options Action – How Volatility in Options Trading Can Create Huge Profit Opportunities

Options Action

Options Action – How Volatility in Options Trading Can Create Huge Profit Opportunities

” OPTIONS” is a weekly stock market newsletter from Scottrade. ” OPTIONS “is hosted by Bruce Kovner and John Grace.” OPTIONS” features top sector traders from some of today’s top investment companies. Each week, they meet for an intense, half-hour special program which focuses on how to maximize profits and limit risks with common stock-market-trading tools. This stock trading newsletter provides the readers with valuable stock market information and trading ideas to help make your investment decisions even more profitable.

Stock market investing is big business, indeed. In fact, it is by far, the largest industry in the world. A huge number of traders ranging from newbies to veteran Wall Street pros rely on the stock market to direct their overall portfolio holdings. For this reason, understanding the fundamentals of stock options is extremely important for novice traders.

The most important part of any options trading strategy is knowing when to sell the option in place of what you are buying. That’s why this particular type of investing has become known as one of the hottest strategies for growing wealth at home. In other words, if you know when to buy and hold an option, you become a lot more versatile as an investor. You can use this knowledge to your advantage, of course. There are a number of reasons for learning the ins and outs of options trading and one of them is to be able to determine when to sell these types of securities.

Options trading strategies deal primarily with call and put options. Those investments represent two distinct positions, a trader may take in the stock market. In call options, investors can purchase a right (buy) to buy a stock at a specific price within a set period of time. In put options, investors can sell that right (sell) for the same stock at a different price within the same period of time. Both of these positions have expiration dates, which is why they are known as “call options” and “put options.”

When it comes down to it, a call option is really just a way to buy a stock at a certain price before it expires. While the expiration date is important, it’s not nearly as crucial as when the actual option purchase date is. Call options are usually purchased by speculators, meaning they are investors who don’t actually own the underlying security. That’s fine for them, but what about when the price goes down? If no one wants to buy the underlying securities, then why buy the option? This is where the similarities between options and stocks come in.

Since many investors don’t know when to buy a stock when it’s down, it’s pretty much expected that some people will turn to options trading. With options trading, the options seller has the obligation to buy a specific amount of stock (the “call option”) at a specific price (the “put option”). If the amount purchased meets or exceeds the amount that was paid out (the “premium”), the seller will be obligated to sell the stock at the strike price. Because this contract is so similar to the terms of a stock purchase, you can see how options can create huge volatility in the market.

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