Option as a trade
Options Trading: Understanding Option Prices
Call or visit a branch Call us: Options Discover how to trade options in a speculative market The options market provides a option as a trade array of choices for the trader. Like many derivatives, options also give you plenty of leverage, allowing you to speculate with less capital. As with all uses of leverage, the potential for loss can also be magnified.
The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type. Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option.
When the buyer of a long option exercises the contract, the seller of a short option is "assigned", and is obligated to act. After three months, you have the money and buy the clock at that price.
If you understand this concept as it applies to securities and commodities, you can see how advantageous it might be to trade options. For a relatively small amount of capital, you can enter into options contracts that give you the right to buy or sell investments at a set price at a future date, no matter what the price of the underlying security is today.
There are a wide variety of option contracts available to trade for many underlying securities, such as stocks, indexes, and even futures contracts.
The thinkorswim platform is for more advanced options traders. It features elite tools and lets you monitor the options market, plan your strategy, and implement it in one convenient, easy-to-use, integrated place. Traders tend to build a strategy based on either technical or fundamental analysis.
Technical analysis is focused on statistics generated by market activity, such as past prices, volume, and many other variables. Charting and other similar technologies are used. Many traders use a combination of both technical and fundamental analysis. In addition, you can explore a variety of tools to help you formulate an options trading strategy that works for you.