Options Basics: Conclusion
  1. Options Basics: Introduction
  2. Options Basics: What Are Options?
  3. Options Basics: Why Use Options?
  4. Options Basics: How Options Work
  5. Options Basics: Types Of Options
  6. Options Basics: How To Read An Options Table
  7. Options Basics: Conclusion

Options Basics: Conclusion

We hope this tutorial has given you some insight into the world of options. Once again, we must emphasize that options aren't for all investors. Options are sophisticated trading tools that can be dangerous if you don't educate yourself before using them. Please use this tutorial as it was intended - as a starting point to learning more about options.

Let's recap:

  • An option is a contract giving the buyer the right but not the obligation to buy or sell an underlying asset at a specific price on or before a certain date.
  • Options are derivatives because they derive their value from an underlying asset.
  • A call gives the holder the right to buy an asset at a certain price within a specific period of time.
  • A put gives the holder the right to sell an asset at a certain price within a specific period of time.
  • There are four types of participants in options markets: buyers of calls, sellers of calls, buyers of puts, and sellers of puts.
  • Buyers are often referred to as holders and sellers are also referred to as writers.
  • The price at which an underlying stock can be purchased or sold is called the strike price.
  • The total cost of an option is called the premium, which is determined by factors including the stock price, strike price and time remaining until expiration.
  • A stock option contract represents 100 shares of the underlying stock.
  • Investors use options both to speculate and hedge risk.
  • Employee stock options are different from listed options because they are a contract between the company and the holder. (Employee stock options do not involve any third parties.)
  • The two main classifications of options are American and European.
  • Long term options are known as LEAPS.

  1. Options Basics: Introduction
  2. Options Basics: What Are Options?
  3. Options Basics: Why Use Options?
  4. Options Basics: How Options Work
  5. Options Basics: Types Of Options
  6. Options Basics: How To Read An Options Table
  7. Options Basics: Conclusion
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  2. Call Option

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  3. Call On A Put

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RELATED FAQS
  1. How do speculators profit from options?

    As a quick summary, options are financial derivatives that give their holders the right to buy or sell a specific asset by ... Read Answer >>
  2. How can derivatives be used to earn income?

    Learn how option selling strategies can be used to collect premium amounts as income, and understand how selling covered ... Read Answer >>
  3. What is the difference between "right" and "obligation" on a call option?

    Learn what a call option is, what determines a buyer and seller of an option, and what the difference between a right and ... Read Answer >>
  4. Do options make more sense during bull or bear markets?

    Understand how options may be used in both bullish and bearish markets, and learn the basics of options pricing and certain ... Read Answer >>
  5. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  6. Are there any risks involved in trading put options through a traditional broker?

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