Invest in Options.
Option Investing
People have been investing in options for centuries, but it was not until 1973 that standardized, exchange-listed and government-regulated options became available. However, in the 3 decades since then, option investing has become an extremely popular and profitable business. Many have invested their money in this and have earned handsome profits. To aid investors, a huge number of brokerage firms have come up.
What is the option market? It is a place where the rights to buy or sell stocks is traded, as per pre-established prices and exercise terms. For these rights, the holder of the stock pays a premium, and may exercise them within the expiration date or on the expiration date, or resell the stock in the market. In other words, it can be said that the option market is an order driven market, just like the equities market. Buy and sell orders are executed on the Derivatives Trading Platform or DTP.
Options trading gives the investor the ability to participate when the market is moving up trends, downtrends or sideways. Just as importantly, it gives the investor the ability to control the levels of money and the amount of risk. As volatility rises, the investor can protect more starting capital in safer investments, while still participating in aggressive growth by controlling the underlying shares of stock for a defined period of time.
In option investing, it is important to know about a Call Option and a Put Option. A Call Option gives its holder the right to buy the stock, at the exercise price, in accordance with the conditions decided upon. A Put Option gives its holder the right to sell the stock at the exercise price, in accordance with the conditions decided upon.
The price of an option is called its Premium. The Premium for which an option is bought or sold is determined by the agreement between the parties. The premium is paid by the holder and received by the writer of the option.
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