Calls. Puts. Strike Prices. Expiration Dates. It all seems overwhelming at first. The good news is it’s not as complex as you might think. With a little research and the desire to learn, options trading can be fun and potentially rewarding.
So why options? Let’s say you think the price of a stock is going to go up and you want to profit off of the movement. Rather than purchasing the regular shares of the stock, you can buy options contracts, or calls, which are significantly less expensive and offer much more leverage.
An option can be defined as a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specific strike price on a specified date, depending on the form of the option.
Options let you get in on the action without spending an arm and a leg. You can risk less to make more. Although highly volatile, the leverage behind options can give you the ability to achieve a much higher return on your investments if traded carefully.
The learning process never ends but that’s what makes options so exciting.