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Options Articles

Basic Options Terms

 

Options are good investing and speculative instruments. But options terminology may confuse even experienced investors. In this article we will take up some basic options terms.

 

Critical Options Investing Tip When Trading Naked Calls and Puts

 

An option is a derivative trading product that is best used by investors as a hedging tool providing investing profit protection and profit enhancement. Although it is a powerful risk management tool, it can also be used effectively as a stand-alone trading vehicle.

 

Creating Momentum with Options

 

To create momentum in your options trading you need to understand the advantages and disadvantages of at-the-money options, in-the-money options and out-of-the-money options.

 

Day Traders and Swing Traders and Options? Maybe!

 

Typical day traders and swing traders look for stocks with quick, short term movements, and are not in the business of holding positions overnight let alone a week or two. So the use of options has not usually been a component of their trading strategies.

 

 

Part II of Day Traders and Swing Traders and Options? Maybe!

 

Before every protective put trade it is possible to calculate your anticipated maximum loss. Use the formula: (stock price minus strike price) plus option price. For example, suppose you will pay $30.00 for your stock, and you want no more than a $3.50 loss on the position.

 

Fundamentals of Option Pricing

 

When one begins to consider an option, it is very important to figure out how the premium is calculated. Option premiums depend on a variety of factors including the time left to expiry as well as the price of the underlying security. There are two parts to an option premium: intrinsic value and time value. Consequently, several different factors have an influence on intrinsic and time value.

 

High Volatility Investments

 

Penny stocks and options are high volatility investments that attract both the trader and the long term investor because of the small amount of capital required to make substantial gains as compared with less volatile higher priced stocks.

 

Issuing Warrants to Investors

 

When raising capital for a business venture, warrants are a common form of equity that is given to investors. A warrant is like an option ? it gives the holder the right to buy a security at a fixed or formulaic price, which is known as the "exercise" or "strike" price.

 

 

 

 

 

 

 

 

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