The price you bet a stock will be over or under is called the strike price. You either bet a stock will be above or below a specific price, and at a particular time. You can think of trading options like placing an over-under bet.
You can even save money buying options than you would if you bought the stock outright. Let’s discuss how you can use options to turn a profit whether the market goes up or down.īelieve it or not, you can purchase options in companies you support every day, like Google, Amazon, Facebook, Apple, and more.
Now you know that trading options can be like buying insurance on a current investment.
#OPTIONS TRADING FOR BEGINNERS HOW TO#
Also, you don’t need to own a stock to buy an option! They can be bought and sold just like stocks, and if done correctly, they can earn you a TON OF MONEY! How to Start Trading Options Plus, he can take his initial investment and put it into stocks that are currently turning a profit. John just saved himself from a $3,125 loss! Now that’s INSURANCE! He only lost his $500 payout for his purchase of the option. Even though the price of Nike’s stock dropped by $25 per share, he hasn’t lost any of his initial investment. John decides to exercise his right to sell his $500 put option. Meanwhile, there are other stocks out there that could offer a return-on-investment. John knows that it could take a while for Nike’s stock to rebound. He can cut his losses and sell the stock.īUT John is not your average investor.He can keep the stock and pray that it goes up.If John were a normal investor, he would have two options: In the next 30 days, Nike’s stock falls to $100 per share. He decides to buy an option as insurance. However, John feels a little nervous about the volatility of the market. Let’s say John by 100 shares of Nike for $125 per share. Options trading is like purchasing insurance for an investor. These contracts are purchased at a predetermined price for a predetermined time. This contract gives the buyer has the right, but not the obligation to buy or sell a stock or other asset. Consider this your options trading for beginners course. It makes you wish you could make money on a stock regardless if it goes up or down, but that’s CRAZY TALK… right?īelieve it or not, traders do this successfully every day! It’s called options trading. You’re starting to understand the term inherent risk. Lately, though, your stocks aren’t performing as you hoped. It feels good to get a return on your investment. Maybe you’ve even set up a brokerage account and traded a few stocks. You’ve finally entered the world of trading stocks.
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