Learn About Options Trading

 Stock Options.  Have you heard of this term?  It is a difficult concept but one you may stumble across when learning about stocks.  This investment is not always considered good practice or a long-term investment strategy, but because questions arise, let’s cover the topic briefly.

 If you have the time and effort to monitor the market closely, there are different strategies to buying stocks. One of these is called options trading, and more specifically we are going to discuss a call and a put option.

 Options are contracts that come with terms including the name of the stock, a price and an expiration date.  They can either give you the right to buy (call option) or sell (put option).

 Simplistically, with a call option, if the price of a stock goes up, you can exercise your right to use your call option and buy at your named price.  If the price does not go up, you can let the contract expire but you will lose your payment. And, with a put option, if the price of a stock goes down, you can execute your right to sell at your price.  However, if the price of the stock goes up, you can let your contract expire, but you will lose your initial payment.

 In order to trade options, you need to have a good sense of where the market is going, you need to time it right in a very short window, and you need to be very hands-on.  You may get lucky, but you need to be aware of the risk. This topic can get more complex, and there is a lot more information out there that is easily accessible if you are interested!

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