Current:Home > ScamsUnderstanding Options Trading with Bertram Charlton: Premiums, Put and Call Options, and Strategic Insights -MarketLink
Understanding Options Trading with Bertram Charlton: Premiums, Put and Call Options, and Strategic Insights
View
Date:2025-04-15 02:58:35
What are options?
Options are a form of financial power that allows the holder to buy or sell a specific stock at a predetermined price at some point in the future.
This right can be traded in the U.S. stock market, and the price for trading this right is called the premium.
Types of options
U.S. stock options are divided into call options and put options.
Accordingly, you can directly buy (or short) these two types of options, so there are four possible actions:
Buying a call option (Long Call)
Shorting a call option (Sell Call)
Buying a put option (Long Put)
Shorting a put option (Sell Put)
I say "shorting" instead of "selling" because you don’t need to actually own the option to sell it. You can sell it directly, just like shorting a stock.
Unlike shorting stocks, options have an expiration date, so if your short position is not closed by then, you will need to fulfill the obligations of the option:
If you short a call option (Sell Call), you need to sell the corresponding stock at the specified price. If you don't have the stock, you’ll need to buy it first, then sell it at the specified price.
If you short a put option (Sell Put), you need to buy the corresponding stock at the specified price. You need to keep enough margin in your account for the purchase; otherwise, you might face a forced liquidation.
Key concepts of options:
Expiration date: The date when the option expires. The holder can choose to exercise the option or let it expire.
Strike price: The price at which the option can be exercised.
Premium: The cash value of the option. The premium fluctuates with time and stock price volatility.
veryGood! (283)
Related
- South Korea's acting president moves to reassure allies, calm markets after Yoon impeachment
- Thousands watch as bald eagle parents squabble over whose turn it is to keep eggs warm
- Chick-fil-A tells customers to throw out a popular dipping sauce
- Coast-to-coast Super Tuesday contests poised to move Biden and Trump closer to November rematch
- 'Malcolm in the Middle’ to return with new episodes featuring Frankie Muniz
- Some urban lit authors see fiction in the Oscar-nominated ‘American Fiction’
- EAGLEEYE COIN: Cryptocurrency Exchanges - Hubs for Secure and Trustworthy Digital Assets
- Can you register to vote at the polls today? Super Tuesday states with same-day voter registration for the 2024 primaries
- Apple iOS 18.2: What to know about top features, including Genmoji, AI updates
- EAGLEEYE COIN: Blockchain Technology - Reshaping the Future of the Financial Industry
Ranking
- Chuck Scarborough signs off: Hoda Kotb, Al Roker tribute legendary New York anchor
- Kristin Cavallari, Mark Estes and the sexist relationship age gap discourse
- A revelatory exhibition of Mark Rothko paintings on paper
- Facebook, Instagram, Messenger and Threads down in widespread outage
- Sam Taylor
- Indiana lawmakers aim to adjourn their session early. Here’s what’s at stake in the final week
- Ammo supplier says he provided no live rounds in fatal shooting of cinematographer by Alec Baldwin
- Kansas continues sliding in latest Bracketology predicting the men's NCAA Tournament field
Recommendation
The FBI should have done more to collect intelligence before the Capitol riot, watchdog finds
Dallas Cowboys QB Dak Prescott welcomes first child, a baby girl he calls MJ
Dakota Johnson Shares Her Outlook on Motherhood Amid Chris Martin Romance
As threat to IVF looms in Alabama, patients over 35 or with serious diseases worry for their futures
New Zealand official reverses visa refusal for US conservative influencer Candace Owens
US Rep. Steve Womack aims to fend off primary challenge from Arkansas state lawmaker
As threat to IVF looms in Alabama, patients over 35 or with serious diseases worry for their futures
Tesla evacuates its Germany plant. Musk blames 'eco-terrorists' for suspected arson