Home
About Me
FOR YOU Options Coaching
Trading Tips
WEB BASED COURSE Module 1
Module 2
Module 3
Module 4
Module 5
Module 6
RESOURCES Marketclub
FREE Chart Analysis
Investing Articles
Site Tutorial
COMPANY INFO Contact Me
Privacy Policy
Disclaimer

XML RSSFree  Updates to     the Site

XML RSS
Add to Google
Add to My Yahoo!
Add to My MSN
Subscribe with Bloglines

Options Trading Basics Review

Module 1: Option Basics
Lesson 6: Options Trading Basics Review




Before we move on to module 2 let's do a quick recap of Module 1: Option Basics

  • Definition of Stock Options: If you buy or own a stock option contract it gives you the right, but not the obligation, to buy or sell shares of a stock at a set price on or before a give date (time period). After this date, your contract expires and your option ceases to exist.


  • Derivatives are another name used for stock options.


  • Stock Options are contracts; they don't represent ownership in anything. They are merely contracts that grant you certain rights.


  • Options trading can be defined as buying contracts that you think will increase in value. Once they do increase in value you sell them at a higher price and pocket the difference.


1 stock option contract = 100 shares of a company's stock. So when you buy 1 contract you are buying the right to, buy or sell, 100 shares of that stock.


2 Types of Stock Options: Puts and Calls

The "Put option" gives its buyer the right, but not the obligation, to sell shares of a stock at a specified price on or before a given date.

The "Call option" gives its buyer the right, but not the obligation, to buy shares of a stock at a specified price on or before a given date.

  • You buy a Call option when you think the price of the underlying stock is going to go up.


  • You buy a Put option when you think the price of the underlying stock is going to go down.


For trading purposes, Puts and Calls expire the 3rd Friday of the month of expiration. For example if I bought a December option, it will cease to exist (expire worthless) after the 3rd Friday of December.


If the overview has helped to reinforce everything you learned then I think you're ready for the next lesson. Proceed to Module 2: Lesson 1 "Stock Option Valuation"



Module 1: Option Basics

Module Lessons

  1. Explain Option Trading
  2. What are Stock Options
  3. Understanding Stock Options
  4. Stock Options Trading
  5. Puts and Calls
  6. Options Trading Basics Review


Module Instructions: According to how the site is set up, you are now in Module 1: Lesson 6 (Options Trading Basics Review). For the most effective learning experience, read through each lesson in this module one by one, in the exact same order as they are listed in the table of contents to the left.





You can proceed to Module 2 whenever you feel you are ready.




Return to the top of this page, "Options Trading Basics Review"

Return to options trading "Home Page"


footer for options trading basics page