Fundamentals of the Options Market by Michael Williams

By Michael Williams

Recommendations are an funding automobile which may improve nearly any funding philosophy. basics of the choices marketplace presents a transparent, concise photo of this worldwide market. utilizing examples drawn from modern monetary information, this thoroughly obtainable guidebook describes why and the way those flexible instruments can be utilized to hedge hazard and increase go back, whereas explaining well known items together with indexed inventory suggestions, index thoughts, and LEAPS.

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Remember, the newspaper provides historical information, so not all options are listed. Additionally, if an option is not listed on a particular day; it does not mean that it expires or is delisted (options that are no longer listed on an exchange for trading). Rather, it might simply mean that it was not one of the most actively traded options issues. The Internet has made it easy to view trading information on all options online. Many online data providers disseminate free end-of-day option bid and offers, the trading day's last sale and/or closing price, volume oftrade, and sometimes the open interest (the amount ofcurrent open positions in a particular option series).

Figure 2-6 IBM options quote page. Characteristics of Stock Options 23 Quiz 1. What are the two types of options? 2. The established price at which the purchase (in the case of a call) or sale (in the case of a put) of the underlying security will occur upon exercise of the option contract is known as the _ 3. The date on which the right to exercise an option ceases to exist is known as the and generally falls on the _ of the month. shares of the 4. One stock option generally represents underlying security: 5.

I 42 43 44 45 46 47 48 49 50 51 Share Price 52 53 54 55 56 57 58 Chapter 3 30 investment in the option will be lost. There will be a partial loss if the stock is trading between $50 and $52 upon expiration of the option. The outlook on this stock is bullish. Short Call The seller (writer) of a short call has as much loss potential as the short seller of stock but faces much less potential for gain. The retail investor will need to meet capital requirements in order to transact this position.

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