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from: www.TradingExposed.com
If you scan through the business section of major broadsheets, you will most likely notice that some business executives are given what are called options as part of their annual salaries or as bonuses for jobs done well.
But what are options, really? Are they similar to stocks? What does it mean when they say options are exercised? These are some of the options questions whose answers we will learn in this article.
Options are similar to stocks in a way that they also may be traded in the stock market.
However, holders of options can only buy or sell, thus, 'exercise', their options at a given price and at a specific time frame. Stocks trading may be conducting at any time of the day as long as the session is progress, whereas options trading happens at a predetermined time and at a predetermined rate.
You should also bear in mind that options are not accessible to just about anymore. Again, such instruments are only awarded by company board's to people who have shown impressive performances during their tenure, unlike stocks, which are open to be purchased by people both in and out of a certain company.
You might notice that most of the present times' news about options trading are negative. Where executives are often accused of backdating their options, or setting the timing of the options at times when the stock value is low, so they can sell their options and gain profits when share values go up.
Regulators and authorities are currently cracking down on such activities and many companies and executives have already been found guilty.
The good thing about options is that they help shield traders from volatile market conditions. As mentioned earlier, options allow individuals from buying a low stock price and selling at a later set date for a higher value. The transaction is relatively safer to move in because it is more predictable than trading stocks.
It is not that difficult to learn options trading, again, because you don't really have much market movements to track given its fixed time frame. Also, since they are actually 'options', you can choose not to exercise them immediately and wait for values to rise before you sell, thereby allowing you to maximize your gains.
At this point, we must highlight that options have expiration dates. Nope, they don't last forever, so they must be exercised before the expiry date lapses. If you hold on too long to your options, you might stand to lose.
This can be a little tricky, especially if a certain companies value goes up and down intermittently in the days leading to the expiration date. If this happens, it is suggested that you sell immediately when the values are high and not try to tempt fate by holding out until the last minute.
Options trading, after all, no matter its fixed nature, is still a gamble. While it is not as risky as stocks, you still have the responsibility to maintain enough foresight and prudence to know when to go forth and when to stop.
Christine P. Gray is a recognized authority on the subject of online trading. Her website Trading Exposed provides a wealth of informative articles and resources on everything you will need to know about Options Trading. All rights reserved. Articles may be reprinted as long as the content and links remains intact and unchanged.
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Options Trading Specific links
Options Trading News
Options exchange CBOE files for $300 million IPO - The Associated Press
 The Business Insider | Options exchange CBOE files for $300 million IPO The Associated Press The Chicago exchange, the largest platform for options trading in the US, did not say when it plans to go public or how many shares it hopes to sell. ... Summary Box: Options exchange CBOE plans long-expected IPO of up to $300 million CBOE Seeks To Raise $300M In IPO CBOE, US's Largest Options Exchange, May File for IPO |
CORRECT: Eurex To Launch Korean Equity Options Trading In Late August - Wall Street Journal
CORRECT: Eurex To Launch Korean Equity Options Trading In Late August Wall Street Journal The move intensifies the push by Eurex into options trading amid wider efforts to expand in Asian markets. Strong retail demand has made the Kospi 200 ... Eurex to start trading futures on Korean options KOSPI options to start trading on Eurex in August Korean derivatives to be traded in Europe |
Business gives thumbs down to options rule - Globe and Mail
Business gives thumbs down to options rule Globe and Mail ... exercising options on public company shares worth less than $100000 were allowed to defer the tax they owe on the difference between the trading price ... |
Daily Options Trading for CKE Restaurants (CKR) - Market Intellisearch
Daily Options Trading for CKE Restaurants (CKR) Market Intellisearch CKE Restaurants options saw high put activity today. A total of 1253 put and 223 call contracts were traded raising a high Put/Call volume alert. ... |
Daily Options Trading for Myriad Genetics (MYGN) - Market Intellisearch
Daily Options Trading for Myriad Genetics (MYGN) Market Intellisearch MYGN options saw interesting call activity today. A total of 77 put and 2123 call contracts were traded raising a low Put/Call volume alert. ... Options Activity for Elan Corporation, (ELN) |