You have probably heard of the idea of using ‘options’ in trading on the stock market, as one possible active strategy to use in preference to buy-and-hold. You have probably heard of the fact that option prices are much more volatile than share prices, and that you can buy and sell options without ever having to buy the shares themselves.
If you are just starting your options trading training, you may not yet understand where these ‘options’ come from. If I buy a call option, I am agreeing with another party that I can choose to buy the corresponding shares from that party, at the agreed price, at any time up to the expiry date of the option. But, as in any deal, there are two sides to this trade.
If I can buy the option from the other party, then he is selling the option to me. He can do this because he actually owns the corresponding shares, so he can supply the shares to me if I choose to exercise my option in the future. Continue reading ‘Option Trading Training – make the move from gambling to sound investment’ »