We hope this short course has given you some knowledge about the world of Options. As previously said, options trading isn’t for all investors but, together with the training from Options Domination, you should now feel more comfortable moving forward with your chosen Options House.
In the open market Options are sophisticated trading tools that can be dangerous if you don’t educate yourself. Please use this course as a supplement to what you have learned with Options Domination and broaden your learning of options strategies
- An options contract gives the buyer the right to buy or sell an underlying asset at a specific price on or before a certain date, but not the obligation to do so.
- Options are financial instruments known as “Derivatives” as they derive their value from an underlying asset.
- A call gives the holder the right to buy an asset at a known price within a specified time period.
- A put gives the holder the right to sell an asset at a known price within a specified time period.
- There are four types of investor in options markets: buyers of puts, sellers of puts, buyers of calls, and sellers of calls.
- Buyers are often known as holders and sellers are often referred to as writers.
- The price at which an underlying asset can be purchased or sold is referred to as the strike price.
- The total cost of an option is called the premium. The premium is calculated by reference to the stock price, strike price and time remaining until expiry.
- A stock option contract represents 100 shares of the underlying stock.
- Investors use options both to speculate and hedge risk.
- Employee stock options are different from open market options because they are a contract between the employing company and the holder. (Employee stock options do not involve any third parties.)
- The two main classifications of options are American and European.
- Long term options are known as LEAPS.