A Beginner Guide For Options Trading

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A Beginner’s Guide To Options Trading Learn How To Make Money with Stock Options Introduction When considering saving for the future, many people look into opportunities such as Roth IRAs and mutual funds. However, few people are willing to venture into the world of trading, where investments in stocks, indices, and other securities can substantially build a savvy investor’s portfolio. For those who are willing to brave the waters of loss and gain in order to accrue income, options can seem like a foreign language. Among the various myths that options trading is either fraught with pit-holes or risk free is an investment system that is accessible to everyone. In addition to helping develop an investor’s portfolio, options…show more content…
This can be accomplished by using stock options to purchase an underlying asset. So what exactly are stock options? The investment education website Investopedia perhaps defines it best, stating, “An option is a contract that gives 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. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties” (Investopedia Staff, Options Basics) . Despite its many stipulations, options trading is much simpler than the definition conveys. In short, options trading does just what the name suggests: it gives the trader options so that he or she can potentially incur minimal loss in the event that an investment does not prove fruitful. Here is an example of options trading: Say a trader decides to purchase the stock for a new phone application that will allow users to order groceries while in transit. The trader may speculate that the value of the security is about to skyrocket due to the recent shutdown of similar applications and their companies. The buyer approaches a seller, who informs the investor that the security costs $2000. However, the investor isn’t sure of his prediction and so decides to buy the asset as an option for

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