Why trade options? and some important explanations.
Traders use options for various purposes, including speculation, hedging, and income generation and more. Here are a few key terms and concepts related to option trading:
1. Strike price: The price at which the underlying asset can be bought or sold if the option is exercised.
2. Expiration date: The date on which the option contract expires and becomes void if not exercised. ( Options do expire )
3. Premium: The price paid by the option buyer to the option seller for the rights conveyed by the option contract.
1. Strike price: The price at which the underlying asset can be bought or sold if the option is exercised.
2. Expiration date: The date on which the option contract expires and becomes void if not exercised. ( Options do expire )
3. Premium: The price paid by the option buyer to the option seller for the rights conveyed by the option contract.
4.In-the-money: For call options, it means the market price of the underlying asset is higher than the strike price. For put options, it means the market price is lower than the strike price.
5. Out-of-the-money: The opposite of in-the-money. For call options, it means the market price is lower than the strike price. For put options, it means the market price is higher than the strike price.
6. Time value: The portion of the option premium that represents the time remaining until expiration.
5. Out-of-the-money: The opposite of in-the-money. For call options, it means the market price is lower than the strike price. For put options, it means the market price is higher than the strike price.
6. Time value: The portion of the option premium that represents the time remaining until expiration.
Option strategies: Various combinations of buying and selling options contracts to achieve specific objectives, such as covered calls, protective puts, straddles, and spreads.
Pros & Cons :It's important to note that options trading can be complex and carries inherent risks. Traders should have a good understanding of options and the associated risks before engaging in option trading. Huge risks in some case on the other hand possible huge rewards as well. So trading options can be very risky and it required options trading experiances to trade correctly.
Pros & Cons :It's important to note that options trading can be complex and carries inherent risks. Traders should have a good understanding of options and the associated risks before engaging in option trading. Huge risks in some case on the other hand possible huge rewards as well. So trading options can be very risky and it required options trading experiances to trade correctly.
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