Sunday, April 7, 2019
The Fundamentals of Stock Option Trading
Seasoned information technology expert John F. Abate owns three companies that offer high quality printed guides: Marketforce, Wintrack, and Success Publishers, LLC. John F. Abate is also engaged in stock option trading.
An option is the right to buy and sell an underlying security at a specific price and time. Stock option trading allows the holder to calculate the stock’s future price within the time frame specified by the option. This gives leverage to the holder on whether to exercise his or her option or not.
There are two different types of options: the “calls” and the “puts.” With the call, the option holder has the right to purchase a security at a specific price and time. The put, on the other hand, gives the option holder the right to sell a security at a specific price and time. Stock option trading is based on a call, a put, or a call and a put combined.
The purchase or selling price used in a call or put is known as the strike price. The final price can go above (in calls) or below (in puts) the strike price in the determination of the profit.