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Basic Options Trading 101

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Options Trading 101

Taking Options Trading 101

Options trading 101 should be a required class for any investor. Options represent a unique buying and selling opportunity, but one that seems a bit too complex for your uneducated investor. If you want to stay ahead of the curve, you should make sure that you know exactly how options work and whether or not they will benefit your investment plan.

Options Trading 101: The Basics

Options trading 101 always starts with a bit of theory. When you trade in options, you are not trading in a stock or a commodity. Instead, you are trading in the ability to buy a stock or commodity at a set price at a later date. For those new to options trading 101, this means that you can lock in a price today to buy tomorrow, so long as you can pay a basic fee. This might allow you to buy significant amounts of a particular commodity, for example, for only a fraction of what that price might be after the stock goes up. Not only are you gambling on the performance of a stock, but options make you gamble on whether or not the gamble will be worthwhile in the future.

Are options a good way to make money? Of course. Just think about being able to buy a particular stock for five dollars a share after it has risen to ten dollars a share. Options are also very difficult to use, though. While you will not want to buy a stock if the price has gone down, you can still lose a great deal of money paying the associated fees. Taking the time to sit through options trading 101 is a good way to make sure that you keep your money safe, but you still need to look for help when you first begin trading options.

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