Learning Options Trading

Posted by admin as shares and stocks

If you are a stock market investor you would know that buying a stock for a particular company entitles you as the investor partial ownership in the corporate entity that issues the shares. To put it another way you are purchasing an “equity” participation in the company.

You will find that the best part of the US stocks listed and traded in the stock exchanges are known as equity securities. Trading in stocks is pretty simple. You make your selection, buy the stock at the listed price and then sell it if the value increases if you choose to do so. You can also earn dividends from the company while you hold a stock.

This article is about helping you with Learning Options Trading. Time to learn just what they are? To make it simple, an option is really just a contract.

The difference with a stock and a stock option contract is that the purchaser of a stock option is that they do not take ownership of anything. An option contract makes it so the owner has the right to buy or sell the underlying financial instrument on which it is based.

The type of options most commonly referred to in financial circles is known as “equity options”. You may be interested to know there are different expiration dates for the options. The “regular” options can have expiration dates up to 9 months from the time of issue. There are also options known as LEAPS. This type can have an expiration date of up to three years.

Now lets dive into a bit more detail about an option contract. Equity options just like stock are classified as securities. To get more specific equity options are called “derivative” securities. If you don’t know what that means it is simply that the value is in part based on, or derived from, the value of the particular underlying stocks.

You will find that as equity options are classed as securities they are able to be traded on any of the exchanges in the US that list equity options. You will be pleased to know that like the stock market, exchange listed equity options are overseen by the Securities and Exchange Commission (SEC).