Archive : Stock Options

History and purpose of stock options: Stock Options have been around since the early 70s, and they were created as part of the broader derivatives markets, in an effort to make global financial trading more efficient and more stable. Ultimately the derivatives markets have resulted in smoother stock trading, but they have even stabilized the way commodities such as crude oil trade from day to day, [...]

As you may already know, Options have a unique, non dollar for dollar pricing structure, they offer the best risk / reward ratio for investing and short term trading alike. Stock Option trading is all about taking that unique pricing structure into account and planning an investment strategy with it. Stock Options offer high leverage, depending on the underlying stock and the implied volatility of [...]

Put Options are used extensively by investors as a way to hedge their stock portfolio, much like Call Options, Put Options are legally binding contracts, except that Put Options that grant the buyer the right to SELL 100 shares of a stock, at a predetermined (Strike) price, and they are used by investors who believe or fear that there might be a drop in the underlying stock price! Payout diagram of [...]

The concept of Call Options: American style Call Options are legally binding contracts that grant the buyer the right to buy 100 shares of the underlying stock, at a fixed predetermined price. This right comes at a cost, known as the premium of the Option, and the buyer can exercise this right or sell it back to the market any time before expiration. The buyer of the Call Option expects the underlying [...]