Options Market TradingOptions market trading: Options in general convey the buyer the right, but not the obligation, to buy or sell an underlying entity at a predetermined price by a certain time in the future. Options a very common in real estate where the developer takes options on certain pieces of property as they plan projects. However in our case, we will be talking about a different type of options, the exchange-traded option. In stocks, options generally cover 100 shares of the underlying stock whereas options on futures are on a single underlying contract. In other words 100 shares of an underlying stock equal one options contract. The two types of options you will come across are the call and put options. What are they? In the option world it can be very confusing if you not familiar with the lingo, I won’t blame you for that as it is. Here are some ways you’ll be able to distinguish between the buyers and sellers. The buyers are referred to as holders whereas the sellers are known as the writers. The call and put holders have the choice to exercise their rights if they choose, however for the call and put writers, they are obligated to buy or sell. Common features in options market trading are: Strike Price (Exercise Price): Price at which an underlying stock can be bought or sold. Intrinsic value: amount of money the option is in-the-money. (Note: that a call is in-the-money when the strike price is below current price of an underlying stock or futures contract). Premium: Security buyer pays to writer (grantor) for granting an option contract. Remember that whenever you attempt to predict price movement in any market in the future, you are gambling. Trading the options market can be lethal to your account if you are not an experienced trader. It is a very complex market and much time is needed to master options trading Top of: Options Market Trading Page Back to: Forex Trading Domain Homepage
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