This course is intended for beginner. Please spend an
hour or two to understand the basics of
options trading.
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Trading shares of stock has become as common as surfing the Internet. But, like any financial investment, trading stock is risky...
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Regardless of what the option is on, there are common features. One of the most basic is the contract feature specifying what the option owner has actually contracted for...
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Stock and Bond trading strategies run the gamut from the simple 'buy and hold forever' to the most advanced use of technical analysis. Options trading has a similar spectrum...
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Options trading can become very complicated very quickly. There are LEAPS, choosers, barriers, compounds and a host of technical parameters to measure volatility and predict price movements...
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There are more kinds of risk than there are investments, since every instrument carries several kinds. But risk isn't inherently bad. Without it there'd be fewer opportunities for profit...
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Options price listings vary in appearance from site to site, but most will contain the following basic information. Here's a breakdown of what they list and what it means...
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There are several basic trading strategies, but in order to execute any of them successfully an investor new to options will need to know some elementary concepts...
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Risk isn't inherently bad. Without it, there would be far fewer opportunities for profit. In particular, there would be no options market at all. No one would have to speculate on price direction or other factors...
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The ancient Greeks are justly praised for inventing much of elementary mathematics. But it was left to moderns to create the tools that help options traders quantify risk and calculate prices...
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Unlike stocks, options have an expiration date. Unless a company goes bankrupt or buys back all its stock, the stock investor always has the choice to wait for a price correction...
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Since that option was out-of-the-money it sold at a discount. That's 'compensation' for the greater risk entailed in buying the call...
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Because the actual calculation, and sometimes even the discussions, of volatility involve some fearsome mathematics, novice options traders often forgo learning about it...
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Imagine a teeter-totter in a children's playground. A small child can lift an adult into the air, provided the pivot point under the horizontal plank is placed appropriately. That force 'multiplier effect' has an analogy in financial markets...
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A hedge is an investment made to offset the risk incurred by entering another investment. Ironically, the basic idea is to bet against oneself...
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There exist today an array of charts, patterns and statistical analyses large enough to please even a Medieval numerologist. Though it often looks and reads much like mathematical tea-leaf reading, most of the commonly used tools are based on serious empirical studies of the markets...
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You often see the phrase 'options and futures', as if the two were financial Siamese twins. But, though similar, there are important differences the savvy investor should keep in mind...
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Futures have value as a mechanism for trading risk, publishing prices, and (like options) taking speculative advantage of leverage...
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Trading options is risky. While the risk is limited to the cost of the option, that isn't necessarily small. A Google June 400 call can cost around $2800...
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