4 of 4

Write now Article Tools

Options is a contract that give a trader a right to buy or sell the financial instruments at specific date. The trader have an options to exercise or not to exercise the right. Options available on futures markets (currency, stock indexes and commodities) and individual stock.

There are three important term for options trader to know which are:
Strike price - which is the option exercise price.

Expiration date - the latest date the options can be exercise, the dead line date.
Premium fee - the fee that the buyer must pay to seller to secure the options.

Options is trades by a Call or a Put. A Call options give the holder the right to buy the underlying instrument, chosen when a trader predict the market will go up. A Put options give the right to sell the underlying instrument, chosen when a trader predict the market will go down. The buying or selling right only take effect when the option is exercised, which can happen at any time until the expiration date.

When a trader buy an options contract, there are fee involve called options premium, which paid in front to the trader that sell the contract.

The long options trade by buying an option contract theoretically more profitable, as the buyer have two options to exiting the trade which is to sell the contract or to exercise the options.

Learn more about this author, Ananova.
Click here to send this author comments or questions.

Add your voice

Know something about How are options traded??
We want to hear your view. Write now!