| Stock options are important investments to | | | | contracts. |
| consider when you are building wealth in the | | | | |
| stock market. The most basic definition for a | | | | The price of a stock option must go above the |
| stock option is a contract that allows an | | | | strike price for investors to exercise and |
| investor to purchase or sell a specified | | | | make a profit on call options and the price |
| stock at a specified price, within a | | | | must go below the strike price for investors |
| specified amount of time. Employers commonly | | | | to make a profit on put options. When options |
| give stock options as asset based | | | | fall into these ranges, they are called "in |
| compensation, and investors buy and sell | | | | the money". |
| options on the stock market to gain capital. | | | | |
| Every stock option is characterized by the | | | | Options can be used for a wide range of |
| name of the stock, the strike price, the | | | | trading scenarios, such as: |
| option contract expiration date and the price | | | | |
| that was paid for the contract. | | | | -Reducing your risk from stock ownership |
| | | | |
| Basic Terms: | | | | -Generating an income from stock you already |
| | | | hold |
| Call Options- these give the owner the right | | | | |
| to buy a stock at a specified price, within a | | | | -Speculative trading in an up or down market |
| specified amount of time. Investors who buy | | | | |
| call options are hoping that the stock value | | | | -Multi leg option strategies to take |
| increases before the option expiration date. | | | | advantage of specific market action |
| | | | |
| Put Options- these give the owner the right | | | | -Volatility based strategies to take |
| to sell a stock at a specified price, within | | | | advantage of market volatility even if you do |
| a specified amount of time. Investors who buy | | | | not know which way the market will go. |
| put options are hoping that the stock value | | | | |
| decreases before the option expiration date. | | | | While is it true that options take some time |
| | | | to understand and to master, most people |
| Strike Price- the price that the option can | | | | agree that once they have spent the time to |
| be bought or sold at. | | | | properly educate themselves about options, |
| | | | that they are much better off for doing so. |
| Options Investor Types: Buyers of Call | | | | |
| Options, Sellers of Call Options, Buyers of | | | | Many stock traders I know, once learning |
| Put Options, Sellers of Put Options | | | | about options have never traded a single |
| | | | stock again. They can make more money, and |
| There is an important difference between the | | | | take less risk by using a properly structured |
| investors who buy and investors who sell | | | | option strategy. |
| options. Investors who buy puts and calls | | | | |
| have the choice to exercise their option | | | | So if anyone is still on the fence, it's |
| contracts. Investors who sell puts or calls | | | | definitely worth taking the time to learn |
| have the obligation to exercise their options | | | | about options. |