Options trading when boiled down to a simple sentence is that the investor is determining that a particular stock will trade at either a higher price or a lower price in a stated time period.
Options traders can make determinations of higher price, lower price or if unsure can place options for higher and lower.
Making determinations in options provides the investor the opportunity and flexibility to make determinations on specific market outcomes.
In the United States, a single option represents 100 underlying shares.
In other countries such as Australia, a single option can and often is in multiples of 1,000 underlying shares.
This leverage provides enormous opportunities for large returns in a very short period of time.
This leverage also provides equally large opportunities for loss.
Options can be traded in single stocks or in groups of related stocks.
Trading in single stocks can produce more volatility since one single company can be affected my many factors.
Trading in groups of stocks removes the volatility that one company can exhibit and spreads the risk, and sometimes the rewards over the entire group.
The advantage of trading in a group of stocks is that the group of stocks will more closely track the general trends of the investment community.
Options can be taken on the following groups of indicies: OEXStandard & Poors 100 (US) DJXDow Jones Exchange SPXStandard & Poors 500 (US) XEOStandard & Poors 100 (Europe) QQQQ NASDAQ 100 RUTRussell 2000 Index Prior to simply investing money by taking a guess at where a stock option is going to be, investors must put some effort into determining market trends and utilizing basic guidelines for their investments.
If that effort is not exerted, then the investor may as well post a copy of the financial section of the Wall Street Journal on the wall and throw darts at it, buying options on the stocks that the darts hit.
Options trading provides the investor the opportunity for a remarkable return on investment.
However without proper preparation and training the risks can also be remarkable.
Numerous techniques and strategies exist for planning in options trading.
The investor must prepare by understanding the strategies and techniques as applied to the financial markets.
As with any endeavor, success is a result of planning and hard work.
Options traders can make determinations of higher price, lower price or if unsure can place options for higher and lower.
Making determinations in options provides the investor the opportunity and flexibility to make determinations on specific market outcomes.
In the United States, a single option represents 100 underlying shares.
In other countries such as Australia, a single option can and often is in multiples of 1,000 underlying shares.
This leverage provides enormous opportunities for large returns in a very short period of time.
This leverage also provides equally large opportunities for loss.
Options can be traded in single stocks or in groups of related stocks.
Trading in single stocks can produce more volatility since one single company can be affected my many factors.
Trading in groups of stocks removes the volatility that one company can exhibit and spreads the risk, and sometimes the rewards over the entire group.
The advantage of trading in a group of stocks is that the group of stocks will more closely track the general trends of the investment community.
Options can be taken on the following groups of indicies: OEXStandard & Poors 100 (US) DJXDow Jones Exchange SPXStandard & Poors 500 (US) XEOStandard & Poors 100 (Europe) QQQQ NASDAQ 100 RUTRussell 2000 Index Prior to simply investing money by taking a guess at where a stock option is going to be, investors must put some effort into determining market trends and utilizing basic guidelines for their investments.
If that effort is not exerted, then the investor may as well post a copy of the financial section of the Wall Street Journal on the wall and throw darts at it, buying options on the stocks that the darts hit.
Options trading provides the investor the opportunity for a remarkable return on investment.
However without proper preparation and training the risks can also be remarkable.
Numerous techniques and strategies exist for planning in options trading.
The investor must prepare by understanding the strategies and techniques as applied to the financial markets.
As with any endeavor, success is a result of planning and hard work.
Source...