Options
Conclusion and Resources
We hope this tutorial
has given you some insight into the world of options. Once
again, we must emphasize that options are not for all investors.
Options are sophisticated trading tools that can be dangerous
if you don't educate yourself before using them. Please use
this tutorial as it was intended--as a starting point to learning
more about options.
Let's recap:
- An option is a contract giving the buyer
the right but not the obligation to buy or sell an underlying
asset at a specific price on or before a certain date.
- Options are derivatives because they derive
their value from an underlying asset.
- A call gives the holder the right to buy
an underlying asset at a certain price within a specific period of
time.
- A put gives the holder the right to sell
an underlying asset at a certain price within a specific period of
time.
- There are four types of participants in
options markets: buyers of calls, sellers of calls, buyers
of puts, and sellers of puts.
- Buyers are often referred to as holders
and sellers are also referred to as writers.
- The price at which an underlying stock
can be purchased or sold is called the strike price (or exercise price).
- The total cost of an option is called
the premium, which is determined by factors including the
stock price, strike price, volatility and time remaining until expiration.
- A stock option contract represents 100
shares of the underlying stock.
- Investors use options both to speculate
and to hedge risk.
- Employee stock options are different from
listed options because they are a contract between the company
and the holder. Employee stock options do not involve any
third parties.
- The two main exercise types of options
are American and European.
- Long term options are known as LEAPS.
Also See
Disnat's list of upcoming options seminars
Subscribe to our mailing list and receive email alerts of upcoming seminars
DisnatClassic's Option Center: Login to DisnatClassic, click Tools & Resources, Option Center
DDweb Option Center: Login
to DisnatDirect, click Tools & Resources, Option
Center
Disnat Bulletins:
Do You Know Options? - June 2003
Buying Calls - July 2003
Covered Calls - August 2003
Buying insurance to protect your portfolio - September 2003
In-the-Money, At-the-Money or Out-of-the-Money Calls? - June 2006
Option Strategy Fact Sheets from the Montreal Exchange:
Buying Call Options Instead of Buying Stocks
Buying Call Options as Protection for Future Purchases
Buying Call Options to Hedge a Short Sale (Protective Calls)
Writing Covered Call Options
Buying Put Options Instead of Short Selling Stocks
Buying Put Options as an Insurance Policy (Protective Puts)
Writing Secured Put Options
Writing Covered Straddles
Long Straddle (Straddle Buying)
Short Straddle (Straddle Writing)
Bear Call Spread (Credit Call Spread or Vertical Spread)
Bull Call Spread (Debit Call Spread or Vertical Spread)
Bear Put Spread (Debit Put Spread or Vertical Spread)
Bull Put Spread (Credit Put Spread or Vertical Spread)
Repair Strategy
Collar
CBOE (Chicago Board Options Exchange)
|
Previous
