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Options
Basics
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Options give you the right, but not the
obligation, to buy or sell a security, at a specific price, for a
predetermined period of time.
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When you buy an option, your maximum
potential loss is limited to the amount you paid for it (i.e., the
premium).
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Each option contract corresponds to 100
shares of an underlying security.
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Buying options is a cash transaction; no
margin is involved.
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When you sell (write) an option, your
maximum potential profit is the amount of the premium you may receive.
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Options lose time value as they approach
expiration. An option loses its time value the fastest during the last
30 days of its life.
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More than 80% of options expire
worthless.
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The lower the volatility of an
underlying security, the lower the option premiums.
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The higher the volatility of an
underlying security, the higher the option premiums.
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Options are less liquid than the
underlying security .
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"Options Trading Systems" |
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