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Understanding Options Trading
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Like futures, an option gives you the right, but not the obligation, to buy an underlying stock at a specified price at a predetermined date in the future.
You earn a profit if the stock’s market value rises above the price by which you acquired your contract upon the agreement’s expiry. If the stock’s market value drops, then you lose your premium.
There are two forms of options: the call option and the put option. If you buy a call option, you are expecting your stock price to go up and you would prefer the put option if you expect the opposite, meaning you expect prices of your stock to decline.
You actually earn a profit regardless of whether the price of your stock goes up or down unlike other derivative instruments where you only earn a profit when the price of your stock rises.
Hedging strategies are used if you are not sure whether the price of your stock will rise or go down. In this case, you will opt to buy a Put option on your stock. If the price actually goes down, then you earn a profit, but if it goes up, you merely lose your profit.
It is also important to remember that if you think your stock will go down, it is best to sell your stocks and earn a profit from it and just purchase put options.
Another strategies traders engage in are selling their options before it expires to buy the underlying stock, let their contracts expire or sell their options. Selling options is actually not a problem as there are agencies responsible for buying these options in order to maintain balance in the system.
You might want to join options forums so you’ll have access to valuable tips that you may not otherwise find in trading books. There are also various online options trading sites that offer free tutorials as well as membership in the exchange.
Like most investments, you also need to be updated about the economy and the different business players if you want to buy options on stocks about their company. It is important to have a good gauge of which businesses to look out for and to trade on.
Armed with enough information, you will be ready to expand your money through online options trading.
In conclusion, if you are risk averse but would want to maximize your investments, then online option trading might work best for you. But of course, you have to equip yourself with as much knowledge as you can.
Commodity Future Trading News
Commodity futures agency looking at high-frequency traders to consider ... - Washington Post
Commodity futures agency looking at high-frequency traders to consider ... Washington Post WASHINGTON — The Commodity Futures Trading Commission is looking at high-frequency traders to gauge their importance in the markets and consider possible new rules for them. The agency announced Thursday that it will establish an advisory panel on ... CFTC Requires Registration by Mutual Funds With Commodities CFTC rule boosts oversight of futures, swaps markets CFTC takes more steps to regulate commodity pools, high speed trading |
Copper Traders Turn Bullish as Economy Spurs Demand: Commodities - BusinessWeek
Copper Traders Turn Bullish as Economy Spurs Demand: Commodities BusinessWeek Hedge funds and other money managers are holding their biggest bet on rising prices since early August, Commodity Futures Trading Commission data show. Inventories tracked by the London Metal Exchange are already at a two-year low after global mine ... |
India Official: Not in Favor of Commodity Transaction Tax - Wall Street Journal
 Zee News | India Official: Not in Favor of Commodity Transaction Tax Wall Street Journal By RAJESH ROY NEW DELHI -- India shouldn't implement a proposed commodity transaction tax as such a move will hit trading volume in all commodity futures, Consumer Affairs Secretary Rajiv Aggarwal said Friday. His ministry is in charge of the commodity ... Commodity futures value may top Rs 170 lakh cr this fiscal |
CFTC creates HFT subcommittee. - Finextra
 Finextra | CFTC creates HFT subcommittee. Finextra The Commodity Futures Trading Commission (CFTC) has voted to set up a subcommittee on high frequency trading in a bid to better understand its effects on the market. Since the flash crash of May 2010, HFT has been in the sights of regulators ... CFTC creates subcommittee on high frequency trading |
Oil Trades Near Three-Week High on U.S. Economic Outlook, Greek Debt Deal - Bloomberg
 Moneycontrol.com | Oil Trades Near Three-Week High on U.S. Economic Outlook, Greek Debt Deal Bloomberg Oil fell from the highest level in three weeks, paring a weekly advance, as concern that Europe's debt crisis will worsen and global commodity demand is weakening countered signs of recovery in the US economy. West Texas Intermediate futures declined ... Crude oil futures plunge on Greek miss Oil Falls From Three-Week High as Greece Counters US Economy Expect downside pressure on precious, base metals: Angel |
Dodd Frank Complexities Heighten Energy Trading Impact Fears - AOL Energy
Dodd Frank Complexities Heighten Energy Trading Impact Fears AOL Energy The Commodity Futures Trading Commission (CFTC) is developing dozens of rules, as ordered by the Dodd-Frank financial reform bill, to try to prevent the kinds of trading abuses that led to collapse in derivatives markets in 2008. Bankers air fears over scope of swaps rules Wall Street Groups Seek to Delay CFTC Rule Limiting Speculation Wall Street Groups Seek to Delay CFTC Limits on Speculation |
Pepper Trades at $6050 Per Ton as Singapore Starts Futures - BusinessWeek
Pepper Trades at $6050 Per Ton as Singapore Starts Futures BusinessWeek 10 (Bloomberg) -- The Singapore Mercantile Exchange started trading black-pepper futures today, the first agricultural commodities contract offered by the exchange. Black pepper for March delivery was at $6050 per metric ton at 5:05 pm in Singapore, ... |
S&P cuts CME Group rating due to MF Global risk - Dairy Herd Management
 BusinessWeek | S&P cuts CME Group rating due to MF Global risk Dairy Herd Management CME, the world's biggest futures exchange operator, served as a primary regulator of MF Global, and the brokerage was one of the top facilitators of trades in CME's futures and options markets. S&P lowered the long-term issuer credit rating for the ... MF Global Watch: Multiple Investigations Continue Barney Frank: MF Global bankruptcy wasn't Dodd-Frank's fault MF Global's Collapse Has Ranchers Steamed |