Options Trading Crash Course In Plain Simple English - The Beginners' Guide Book On How To Trade Option (Learn Both Basic And Advanced Strategies)

By Phil C. Senior

★★★★★ Discover the secrets of becoming a profitable options trader today! ★★★★★

Have you been thinking about trading in options?

Do you want to learn about it but don't know where or how to start?

Do you want to discover strategies that can be used in different market conditions?

Do you want to trade your way to success?

If yes, read on!

 

Most think about stocks, mutual funds, and bonds whenever they think about investing. There is so much more to the financial markets than these instruments. One of the most profitable ways to trade and invest capital in the financial market is to trade options. In general, the value of a product depends on the costs of the raw materials used in the manufacturing process. Similarly, the value of an options contract is based on the value of an underlying security or asset it rests on. An option contract executed between a buyer and seller gives the former a right to purchase or sell the underlying security on a specific date in the future.

The options market can seem overwhelming, especially for a beginner. All the calculations involved in understanding how options are priced and the seemingly complicated jargon can make it seem intimidating. As with anything else, learning something new takes time, effort, patience, and dedication. All this coupled with the right information will make it easier. If you are wondering how to do this, you have come to the right place! This book will act as your guide and help you understand the options market.

 

In this book, you will learn about:

●       the meaning of options and the jargon associated with options trading;

●       the benefits of trading in options;

●       the difference between stock and options trading;

●       different types of brokerage accounts;

●       the importance of strategic planning and selecting a trading strategy;

●       trading strategies for different market conditions;

●       understanding risk and money management;

●       and much more!

 

Are you ready to step into the world of options trading? What are you waiting for?

Grab your copy of today and become a successful options trader!

• Language: English
• Publisher: Bluesource And Friends
• Release date: Sep 12, 2021
• ISBN: 9798201128050

Book preview

Chapter 1: Start With the Basics

Stocks are perhaps the first thing that will pop into your head whenever you hear the word investment. Well, investing in the financial market is not restricted to stocks. Another instrument of trade that is steadily gaining popularity is options. Whenever you are learning anything new, you must start with the basics. Once you understand what options trading means, the basic jargon it involves, and the benefits it offers, you will be better equipped as a trader.

What Is Options Trading?

Options are a type of securities that are collectively known as derivatives. The value of a derivative is based on or derived from the value of something else. It is a derivative because the value of the options contract is determined by the value of an underlying asset or security. For instance, the value of ketchup readily available in the market these days is influenced by the value of raw materials used for making it such as tomatoes. If the price of tomatoes increases exponentially, the price of ketchup will also increase. This is the same logic that applies to options trading.

The purchase and sale of a call or put contract publicly traded on exchanges at a specific price within a given time frame are known as options trading. Options are primarily legally binding contracts that give the option holder the right to purchase or sell a specific number of underlying securities at a fixed price before the contract expires. Options are versatile instruments that can be used to not only create a stream of income but to hedge risks as well.

Options are not just used for speculating in the investment market, but they are used for creating a recurring stream of income as well. Options are two-sided alternatives and include two parties. A basic options contract is based on 100 shares or stocks of a specific company. This is known as security. Before trading in options, consider all the different factors, especially about how and where to invest. Options can be used for speculating the movement of price for different stocks, indices, commodities, or even foreign exchange. The opportunities available while trading in options are truly varied. Due to the wide variety available and the different strategies that can be used, options are believed to be profitable.

While trading in stocks, your profitability is pretty much restricted to two outcomes. You can opt for either short-term trading or long-term trading. From understanding the different types of options available to the market conditions and the strategies you can use, there is plenty to learn. Don’t get overwhelmed because this book has all the information you need.

Get Used to the Jargon

If you are new to trading in options, or even trading for that matter, there are certain basic terms you must understand. Think of it as learning a completely new language. How can you speak fluently and make cohesive sentences if you don't understand the meaning of the basic words? It's time to familiarize yourself with jargon commonly used in options trading.

Call Option

The holder or buyer of a call option has the inherent right of purchasing the underlying securities, shares, or stock at a fixed price before the contract expires—this is known as the strike price. As soon as the option reaches a strike price, the seller, also known as the writer of this option, is obliged to sell the underlying stock or security at the predetermined price once the option is exercised.

Put Option

The buyer of this option has the right to sell the underlying securities or shares the option is based on at a fixed price or strike price before the contract expires. The seller doesn't have any obligation to purchase the underlying stock even when it reaches the strike price.

Strike Price

One of the most important aspects of trading in options is the stock price. You will see this term mentioned in all trading strategies. It refers to the value at which the trader wants to either buy or sell the underlying stock or securities. The strike price stays constant and is determined before entering a specific position. It also stays fixed until the option expires. The underlying security can be purchased or sold only at the predetermined stock price when the trader decides to exercise the option.

Expiry Date

This is another term that is common in options trading. The expiry date is also a feature that’s unique to the options market. It refers to the period within which an options contract can be exercised. The holder of the options can only exercise their right to either buy or sell the underlying security within or on the expiration date.

Time Decay

All options contracts expire. This expiration period can be short term or long term depending on the trader’s outlook. Since all options expire, they are known as wasting assets. Once the option expires, their time value is down to zero, and this reduction is the time decay. The closer the expiry date is, the greater the time decay.

Intrinsic Value

The potential profit you can earn by exercising your right to either purchase or sell the underlying stock of an option contract at the existing market value is known as its intrinsic value. Any option with positive intrinsic value means it expires in the money. The option contract is said to be out of money if it has negative intrinsic value upon