Options Trading University

Video Descriptions

The above video lessons provide traders with options education. From the basic features and terminology that all traders should know, to trading strategies and real live options purchases, we help you navigate the world of options.

In the Options Trading University, you receive valuable lessons including:

Understanding Options Trading

Options trading is a popular financial instrument that allows traders to speculate on the future price movements of an underlying asset. An option is a contract that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price and time. In this article, we will cover the basics of options trading, including how options work, the different types of options, and the risks and rewards of trading options.

How do options work?

An options contract has two parties: the buyer and the seller. The buyer of an option pays a premium to the seller for the right to buy or sell the underlying asset at a predetermined price (known as the strike price) and time (known as the expiration date). The seller of the option is obligated to sell or buy the underlying asset if the buyer decides to exercise their option.

Two basic types of options

There are two types of options: call options and put options. A call option gives the holder the right to buy the underlying asset at the strike price, while a put option gives the holder the right to sell the underlying asset at the strike price. Traders use options to speculate on the future price movements of the underlying asset. For example, if a trader believes that the price of a stock will increase, they can buy a call option. If the price of the stock does indeed increase, the trader can exercise their option and buy the stock at the lower strike price, then sell it on the market for a profit.

What are the risks and rewards of trading options?

Options trading can be a high-risk, high-reward strategy. The potential rewards of trading options include the ability to make significant profits with a relatively small amount of capital. Options can be used to leverage a trader’s investment, meaning that they can control a larger amount of the underlying asset with less money. This means that if the underlying asset moves in the trader’s favor, they can make a larger profit than if they had invested directly in the asset.

However, options trading also comes with significant risks. The premium paid for an option is a sunk cost, which means that if the underlying asset does not move in the desired direction, the trader can lose their entire investment. Additionally, options have a finite lifespan, so traders must be able to accurately predict the direction of the underlying asset within a set timeframe. If the asset does not move in the desired direction within that timeframe, the option will expire worthless.

In conclusion, options trading can be a powerful financial instrument for traders looking to speculate on the future price movements of an underlying asset. Understanding the basics of options, including how they work and the risks and rewards of trading them, is critical for any trader considering options trading. Traders should carefully consider their investment goals and risk tolerance before entering the options market, and should seek out professional guidance if needed.

Disclaimer

FollowtheMoney.com’s investment and trading ideas are for purely for informational and educational purposes only. Trading involves risk. Decisions to buy, sell, hold or trade in stocks, futures, securities, and other investments involve risk and are best made based on the advice of qualified financial professionals.