What Are Stock Options?

If you are interested in the exciting world of the stock market, you should be familiar with stock options. This term refers to a limited time contract between buyer and seller. The contract stipulates that the buyer can purchase the specified stock but is not required to, and that the seller must sell the specified stock at the agreed upon price. Of course once the contract expires this agreement is no longer valid. Options trading is nothing new, it is estimated that the first form of options trading took place around 7 BC in Greece, but instead of stocks the commodity was olives.

There are particular ways to define options trading. One is the date of expiration. This is when the contract ends. The option is based on an underlying asset. Then there is the exercise price, also called the strike price. This is the amount for which the asset is purchased or sold if the holder of the option chooses to do so. There is a difference between options in the United States and Europe. In the United States, the buying or selling can happen at any time period during the contract period. In Europe, the option can only be exercised on the date of expiration.

You may hear the term ATM tossed around. This is not an automatic teller machine, at least not in the world of stock trading. This acronym stands for at-the-money, which means the strike price is very close or identical to the current price. Then there is the acronym OTM, or out-of-the-money. This means the price is too far from the strike amount therefore there is no good reason for the options holder to take action on the contract. Finally an ITM, which means in-the-money, is a position that is profitable for the contract holder.

As you can see, stock options allow traders the potential of profit without a lot of risk. Even those new to stock trading can delve into options trading with a little knowledge. There are a plethora of books, newspapers, magazines and even educational courses which can teach even the most clueless individual how to trade. Before you do decide to invest money, make sure you are well schooled in trading. Also, it is a good rule of thumb to never use money you can't afford to lose. That way if you lose money it may be disappointing but not devastating.






 

 

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Stock Options News:

 

Options Traders: Why "Ending Diagonals" Should Be Your New Best Friend - Elliott Wave

Options Traders: Why "Ending Diagonals" Should Be Your New Best Friend
Elliott Wave
By Nico Isaac Trading options is not for the faint of heart. The stakes are sky high. You're not just buying or selling a security. You're also doing so with the expectation that said security reach a specific price by a specific time.

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About Win Global Markets, Inc. - MarketWatch (press release)

About Win Global Markets, Inc.
MarketWatch (press release)
WGMI entered the binary options business in November 2009, and has been offering online trading of binary options through its wholly-owned subsidiary, WGM Services Ltd. WGMI's online binary options trading business is marketed towards customers who are .

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Unusual Options Activity Review: C, MS, WFT, DRI, MSFT, SLE, DELL, EL, SPX, IYR - The Options Insider

Unusual Options Activity Review: C, MS, WFT, DRI, MSFT, SLE, DELL, EL, SPX, IYR
The Options Insider
May options expire at the end of this week. Bearish trading was also seen in Sara Lee (SLE), Dell Computer (DELL), and Estee Lauder (EL). Puts on the S&P 500 Index (SPX) remain heavily traded. 700000 puts traded on the S&P 500 Monday, which was the .

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FLYHT Aerospace Solutions Ltd. (TSX VENTURE:AMA) Announces Issuance of Stock Options
CALGARY, ALBERTA-- - FLYHT Aerospace Solutions Ltd. today announced it has granted incentive stock options to acquire up to 2,168,500 common shares, subject to regulatory approval, to employees, officers and directors under the stock option plan approved at the Annual and Special Meeting of shareholders ...


Daily Options Trading for iShares MSCI Emerging Markets Index (EEM) - AVAFIN

Daily Options Trading for iShares MSCI Emerging Markets Index (EEM)
AVAFIN
NEW YORK (AVAFIN) -- iShares MSCI Emerging Markets Index options set a new 90-day record for the number of call contracts that exchanged hands between the buyers and the sellers. Aggregate volume of puts was 425728 and calls was 86069 equating to a .

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International Barrier Technology Issues Stock Options
WATKINS, MN-- - International Barrier Technology Inc. announces that it has granted stock options to directors, officers, employees and consultants of the Company, exercisable to acquire up to 3,840,000 ...


How to Buy.: How to buy . options
Puts, calls, strike price, in-the-money, out-of-the-money EUR” buying and selling stock options isn't just new territory for many investors, it's a whole new language...


CME Group Introduces New CBOT Grain and Oilseed Trading Hours in Support of . - MarketWatch (press release)

Farm Futures
CME Group Introduces New CBOT Grain and Oilseed Trading Hours in Support of .
MarketWatch (press release)
. and most diverse derivatives marketplace, today announced measures to help farmers, ranchers and commercial market participants prepare to transition to expanded electronic trading hours for CBOT grain and oilseed futures and options on CME Globex.
CME to start 21-hour trading day by June 4Chicago Tribune
CME: longer grain cycle starts no later than June 4Reuters
Trading halt when USDA issues crop reports?Western Farm Press
DesMoinesRegister.com (blog) -CattleNetwork.com
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