An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties. The idea behind an option is present in many everyday situations. First, when you buy an option, you have a right but not an obligation to do something. You can always let the expiration date go by, at which point the option becomes worthless. Second, an option is merely a contract that deals with an underlying asset. For this reason, options opcions called derivatives, which means an option derives its value from something else. In our example, the house is the underlying asset. Most of the time, the underlying asset is a stock or an index. For this reason we are going to look at options from the point of view of the buyer. Selling options is more complicated and can be even riskier. Trade price at which an underlying stock opcions be purchased or sold is called the strike price. This is the price a stock price must go above for calls or go below for puts before a position can be exercised for a trade. All of trade must occur before the expiration date An option that is traded on a national options exchange such as the Chicago Board Options Exchange CBOE is known as a listed option. Opcions have fixed strike prices and expiration dates. Each listed option represents shares of company stock known as a contract For call options, the option is said to be in-the-money opcions the share price is above the strike price. A put option is in-the-money when the share price is below the strike price. The amount by which an option is in-the-money is referred to as intrinsic value The total cost the price of an option is called the premium. This price is determined by factors including the stock price, strike price, time remaining until expiration time opcions and volatility. Partner Content What is Partner Content? Investopedia hosts articles from other investing and financial information publishers across the industry. While we do not have editorial control over their content, we do vet their articles to make sure they are suitable for our visitors By Investopedia Staff Options Basics: Introduction Options Opcions What Are Options? Options Basics: Why Use Options? Options Basics: How Options Work Options Basics: Types Of Options Options Basics: How To Read An Options Table Options Basics: Conclusion An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date. Though you originally thought you had found the house of your dreams, you now consider it worthless. On the upside, because you bought an option, you trade under no obligation to go through with the sale. Calls are similar to having a trade position on a stock. Buyers of calls hope that the trade will increase substantially before the option expires A put gives trade holder the right to sell an asset at a certain price within a specific period of time. Puts are very similar to having a short opcions on a stock. They have the choice to exercise their rights if they choose Call writers and put writers sellershowever, are obligated to buy or sell. Because of all these factors, determining the premium of an option is complicated and beyond the scope of this tutorial Options Basics: Why Use Options? The adage "know thyself"--and thy risk tolerance, thy underlying, and thy markets--applies to options trading if you want it to do it profitably. Learning to understand the language of options chains will help you become a more informed trader. Learn the top three risks and how they can affect you on either side of an options trade. A brief overview of how to profit from using put options in your portfolio. Discover the option-writing strategies that can deliver consistent income, including the use of put options instead of limit orders, and maximizing premiums. A good place to start with options is writing these contracts against shares you already own. A brief overview of how to provide from using call options in your portfolio Frequently Asked Questions Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences. Options Basics: How Options Work Options Basics: Types Of Options Options Basics: How To Read An Options Table Options Basics: Conclusion.
Learn How To Trade Options With These 15 REAL Trades
Learn How To Trade Options With These 15 REAL Trades
PhD candidate approaches a graduate school, which facilitates contact with a potential research group.
Describes the rights and responsibilities of both a landlord and a tenant during the rental term.
On February 4, 1968, at the Ebenezer Baptist Church, in speaking about how he wished to be remembered after his death, King stated.