Generally, there are options traded for each month and if they go out years, they are referred to as LEAPS. The same concepts hold for LEAPS as the stock options contracts we’re discussing here. Underlying Security: For our purposes, we will be discussing stock options. Buyer or Seller Status: If you are the buyer, you have control of the transaction.
If you are a seller of an options contract, you are at the mercy of the buyer and must rely on the holder at the other end of the contract. Call Buyer: People trade stock options for myriad reasons. Often times, it is purely for speculative reasons. For example, if you believe that the Swine Flu pandemic is going to become particularly troublesome and a stock with a vested interest in supplying vaccines in large quantities would stand to benefit from such a scenario, then perhaps you purchase an out of the money call option on Novavax. Put Buyer: When wondering if anyone actually made money during the economic collapse, the answer is a resounding YES!
People who were holding puts on Financial and Real Estate stocks especially, made large returns on investment given the precipitous declines in shares of those companies. There are various online brokerage outfits that allow you to trade stock options. For most outfits, you can buy options without any special requirements. 95 for 8 or less trades.
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