Stock option trading for dummies

That depends on two factors. The examples given are not necessarily using real world numbers as it is used for illustrative purposes. And I am certainly not making any claims about the profitability of options trading.

Click here to find out stock option trading for dummies latest method of reading options chains. If the buyer is wrong, he lets the option expire, forfeiting only the stock option premium -- not the loss of value for those shares. One option contract is good for shares of that underlying stock. An option contract can be one of two types: If you find you've made some money doing it, then you can risk more capital.

These two concepts are called Intrinsic Value and Time Value. Buyer Beware Until now I've just been giving pure facts about options. That depends on your personal belief on how IBM stock will behave. You can probably guess by now that the closer the market price is to the strike price, the more the option is worth. Any stock option trading for dummies s reading the material on this website should consult their own professional investment adviser before investing in options or any other security.

It's stated that way because one option controls shares. They get it wrong just as often as they get it right. A quick side note about how option premiums are stated. Our newest addition is Mini Options! While it is true that you can realize tremendous profits, the chances of you realizing tremendous losses stock option trading for dummies just as great.

Option Premium The one thing we didn't talk about so far is how much does it cost to buy an option contract? An option contract will always have what's called a Strike Price. Options are inherently risky and you should carefully consider the risks before stock option trading for dummies any money. The Intrinsic Value doesn't decay, just the Time Value. When the value of a stock rises above the strike price of a call option before it expires, the buyer could exercise the option and purchase the shares.