Categorized | Commodities, Options, Stock Tips

What Are Options in Stocks and Commodities?


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What Are Options

What are Options, Really?

What are options, at least in terms of finance? For most, they exist as a kind of magical talisman, a way that certain people make money. In reality, the theory behind options is incredibly simple; it is the trading that is difficult. If you want to figure out how to make money with options, you first have to figure out what they are. Fortunately, the definition can tell you a great deal about what they are and how they work.

Figuring Out What Are Options?

For most, the answer to “what are options” is simple. Options are, after all, just that, the option to do something. In this case, though, it is the option to make a purchase. If you still have trouble figuring out what are options, you might want to start with a basic scenario. Say you want to buy a gizmo. Unfortunately, you do not have the money, yet. You can go to the seller of the gizmo and get an option to buy in a few months, so long as you pay a fee. For that period of time, you can buy at the same price of the option. If you choose not to do so, neither of you are damaged in any way.

Options give individuals the ability to buy in the future at a price set today. This can be very helpful if the stock or commodity in question is likely to go up in value, but less so if the stock or commodity is likely to drop. Trading in options can be a dangerous, if often lucrative, way to invest. If you feel comfortable with it, though, the answer to “what are options” is a simple word: profit.

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