roccogonzales's posterous http://roccogonzales.posterous.com Most recent posts at roccogonzales's posterous posterous.com Mon, 09 May 2011 23:01:00 -0700 Unraveling the basics of option trading http://roccogonzales.posterous.com/unraveling-the-basics-of-option-trading http://roccogonzales.posterous.com/unraveling-the-basics-of-option-trading

You need to know the basics of option trading before you actually get into it. An option contract gives you as the owner the right, but not necessarily the obligation to buy or sell any security. This could be at any date or even at a specified price. There are two types of options that investors buy and sell in, which are quite similar to stocks. These are known as call and put options.

In the call option you have the right to buy an underlying security at a fixed price and within a certain time frame. If you knew that the price of an underlying security would rise in a particular time frame before expiry, then you would have a call option. This will help you make an instant profit of sorts.

The put option allows you the right to sell the underlying security at a fixed price and within a certain time frame. You could purchase a put option if you knew the price of the commodity stock was going down in the near future before the actual expiry of the term. This type of short term selling however is not really for those who are not into risk taking to a certain extent.

There are certain basic facts you need to know about options forex trading. Options are generally quoted on the basis of per share prices. But when sold, these are done in batches of 100 shares at a time. So should a share be quoted at $5, you will be paying $500 for 100 shares. There is what is known as the strike or the exercise price and this is the price at which the underlying security can be purchased or sold at. Options are recognized by the months they expire in. the expiry is the month in which the option closes. As a rule of thumb all options expire on the third Friday of the month unless it turns out to be a holiday. Then the option would expire on a Thursday.

And in conclusion, you have to understand that these are the very basics of options and cannot be considered comprehensive. There is a lot to be understood and that can be done only through experience in the game. If you are just now venturing into investing, then you should sit back and watch how this is done before you actually venture out on your own.

At IG Markets we offer mini and micro commodity CFD contracts. We provide detailed forex trading examples to see how you can trade CFD and also about share trading, commodity trading on our award-winning platform, PureDeal.

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