An option is a contract that gives the buyer the right, but not the obligation, to buy or sell the underlying stock at a fixed price (the strike price) on or before a particular date (expiration date).

Options can be used to take a position on the market in an effort to capitalize on an upward or downward market move. The holder of an option has the right, but not the obligation, to buy or sell the asset underlying an options contract. There are two different types of options; a ‘call’ is the right to buy the stock while a ‘put’ is the right to sell the stock. The person who purchases an option is called the ‘buyer’ while the person who originally sells the put or call is the option ‘seller’.

Options can provide an investor with leverage over a position in an individual stock or basket of stocks reflecting the broad market, allowing him to gain exposure to larger amounts of shares for less money than trading in the actual shares.

At the same time, losses are limited. If you get it wrong and the market moves against you, all you lose is the initial premium paid for the contract. However, the seller of an option can have open-ended losses, unless that option is covered.

Another advantage often touted with options trading is the ability to profit in both an up and down market. If you buy a put when you think the company price is going down, and you get it right, you make money.

Could option trading bring you returns of hundreds or thousands in percentage gains in a matter of days? Are these achievable? Not all the time, according to the experts. These theoretical gains are possible, but they are not common. Options are zero-sum situation. If someone were to make thousands of percentage returns, then somebody on the other side of the trade is ‘giving’ you that money and they are losing money.

The returns depend on the investor’s initial intent and this has implications on the way capital is managed, how an exit strategy is planned and how closely a position is monitored. There is no such thing as easy money.

huh ??? are u providing a definition in option trading or asking the meaning as shown in title ?????

Good post Billy.

Pete

Do you even know what is open trading??

Well Billy share some usefull information for you here if you dont need them just leave.
Great post billy ill save them to my e-mail.

Informative post. That was nice of you.

I think it should move to forex or stock section. but i refer to forex because common practice in forex.

Option is another way to minimize loss by trading but Trade the option need more knowledge than we trade directly to the market. They give some barrier that it can be touch or cross or untouch, so we need good technical and fundamental knowledge, if not you just gamble your luck.

A Good and Informative Post. Futures Options is currently one of my areas of study!

Anybody ever heard of "Wave Strength" promoted by Adam Lass. With his program, he promises great returns with minimum risk by investing in options. He gives you one pick a week. Has anyone tried this program and if so, how has it gone? From what I understand, options are very risky and you can lose a lot more than your initial investment.

In finance option strategy is the purchase and sale of one or various option positions and possibly an underlying position.

very helpful thread for me since I've been researching this subject for quite a while now

Option trading is probably one of the least understood forms of investment that however can offer a wealth of possibilities for those who get involved into it.

so,when we got the money someone out there loss the money,well that made it clear.