What is option trading
What is an Option?
An option is a derivative financial instrument that is an agreement between the parties involved in the buying or selling of assets at a set price. The asset is often a bond, stock, future or a currency.
An option is an opportunity to invest in an idea/asset in which no one believes, and the buyer puts his funds on the opposite of what everyone else thinks will happen. Options have the power of the numbers.
Option trading is a 24-hour process, and runs 365 days per year. Every option trade has a set dead line, and depending on the time gap between the time of buying or selling and the deadline there will be a premium involved.
Call options – 1st option trading strategy
Call options are options that hold the right to be bought
Long calls and short calls are a variety to the normal call options.
Put options – 2nd option trading strategy
Put options are options that hold the right to be sold.
Long puts and short puts add an extra factor to the put option.
Option trading, of course, hold some imbedded risks. Option trading can be a risky adventure and is sometimes said that it is not for trading newbie’s. But doing it right, using right strategies, option trading can be seriously lucrative.