What is Options Trading?
Let’s examine in a brief, non-technical way the basics of what is options trading from the perspective of “Why you should care?" Options are a financial instrument, like stocks and bonds. The most common types and the ones we will be using are Puts and Calls
Like stocks and bonds they can be bought and sold using a traditional or online stock broker. I’ve highlighted online stock broker because the preferred way to maximize your income is to keep your commission costs low, which is best done with online brokers. Options are used in a variety of ways. Examples of their uses are to protect portfolios, to aggressively speculate and to generate income. We are interested in the income generation aspect and learning to do it safely with minimum risk. They have a somewhat specialized terminology. Your presence here will guide you through the terminology, providing you with enough information to extract that extra income you desire. Options are contracts, that is to say, they give the buyer of options certain rights and the seller certain obligations. Check the puts and calls page for the details of these rights and obligations. For now, realize that your goal is to be an option seller. The income you receive when you sell an option is called a premium, and you are paid this because you take on certain risks. Using the safe techniques you will learn here, your risk will be minimized and the premium you collect will become your income. Options are valid only for a specified time period. They slowly waste away in value until they expire. As an option seller, your goal is to have the option expire worthless. When this happens the premium you collected when you sold the option is yours…free and clear…you just generated extra income. Clearly, this is only a summary review. You will learn more as you click through this website. In addition, I recommend these useful non-biased external sites:
http://www.wikinvest.com/wiki/Options_Trading
and
http://www.optionseducation.org/
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