How To Trade Stock Options in 5 Steps
Options are a type of contract that gives the buyer the right to buy or sell a security at a specified price at some point in the future. An option holder is essentially paying a premium for the right to buy or sell the security within a certain time frame.
If market prices become unfavorable for option holders, they will let the option expire worthless and not exercise this right, ensuring that potential losses are not higher than the premium. If the market moves in a favorable direction, the holder may exercise the contract.
Options are generally divided into “call” and “put” contracts. With a call option, the buyer of the contract purchases the right to buy the underlying asset in the future at a preset price, known as the…
