How Options Work
1. Options give you the right to buy or sell an underlying instrument.
2. If you buy an option, you are not obligated to buy or sell the underlying instrument; you simply have the right to.
3. If you sell an option and the option is exercised, you are obligated to deliver the underlying asset (call) or take delivery of the underlying asset (put) at the strike price of the option regardless of the current price of the underlying asset.
4. Options are good for a specified period of time, after which they expire and you lose your right to buy or sell the underlying instrument at the specified price.
5. Options when bought are done so at a debit to the buyer.
6. Options when sold are done so by giving a credit to the seller.
7. Options are available in several strike prices representing the price of the underlying instrument.
8. The cost of an option is referred to as the option premium. The price reflects a variety of factors including the current price of the underlying asset, the strike price of the option, the time remaining until expiration, and volatility.
9. Options are not available on every stock. There are approximately 2,200 stocks with tradable options. Each stock option represents 100 shares of a company's stock.
2. If you buy an option, you are not obligated to buy or sell the underlying instrument; you simply have the right to.
3. If you sell an option and the option is exercised, you are obligated to deliver the underlying asset (call) or take delivery of the underlying asset (put) at the strike price of the option regardless of the current price of the underlying asset.
4. Options are good for a specified period of time, after which they expire and you lose your right to buy or sell the underlying instrument at the specified price.
5. Options when bought are done so at a debit to the buyer.
6. Options when sold are done so by giving a credit to the seller.
7. Options are available in several strike prices representing the price of the underlying instrument.
8. The cost of an option is referred to as the option premium. The price reflects a variety of factors including the current price of the underlying asset, the strike price of the option, the time remaining until expiration, and volatility.
9. Options are not available on every stock. There are approximately 2,200 stocks with tradable options. Each stock option represents 100 shares of a company's stock.
posted by Raphael Blogger @ 1:27 PM
3 Comments:
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