Introduction to Stock Options | |
Stock options can be risky and expensive, so why trade them? Because they are versatile securities that can fulfill many objectives including improving portfolio growth, protecting assets, limiting risk, leveraging assets, and speculation. Options can help make a profit whether the market is moving up, down, or barely moving at all. It is common to think of options as risky investments. While they certainly can be risky, they can also be used to hedge against loss, thereby reducing risk. The objective of this tutorial is to provide a basic understanding of stock options, explain how they are typically used, show how market factors effect option pricing, and explain how option activity can signal stock price movement. An overview of popular strategies such as covered calls and protective puts are explained, as are more complex strategies such as spreads and straddles.
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