American style or European style

If you were short put options, the exercise forces you to buy stock at the strike price, resulting in a long stock position in your account. When options contracts are first created, exercise is specified in one of two different ways: American style or European style. American style options can be exercised on any business day prior to expiration, whereas European style options can only be exercised at expiration. they cost you money) or credit spreads (ie. you recieve a net credit to your broker account from the deal). If a share price action is narrowing into a small range and you feel it is going to break out soon, but don’t know which way, you can take an “each-way” bet. Being an accountant is ok, but like any job working regular hours for someone else, it has it’s drawbacks.

However, with proper risk management and hedging strategies, options trading can become a lot less dependent on the accuracy of the future outcome than stock investing, thereby becoming more of an investment than gamble. Trading Options For A Living I like to think of myself as an entrepreneur. Saturday expiration was established to give the brokerages time to settle the accounts before the options technically (legally) lose their value. However, some (but not all) index options cease trading at the close on the Thursday prior to expiration and those positions are reconciled on Saturday based upon the settlement price established on Friday. Option Exercise The owner of an equity option has the right to buy or sell 100 shares of the underlying stock anytime before expiration. Call it a wash, if you will. You really need an outside edge to beat this commodity game.

When it comes to put options, it works the opposite way – you buy put options if you think the stock’s price is going to fall. What is a Stock Chart A stock chart is simply a graphical representation of the stocks price over a set period of time. The chart shows you at a glance how a stock has performed. There are three 3 basic types of stock charts (bar, line, and candlestick) and depending on your trading style, each chart will serve its own unique purpose. Then sit back and let the options reach their expiration date and you collect the difference between the premium received for selling the $50 put option and the cost of purchasing the $45 put option. It could even decline below $50 equal to the cost of the premium that was received and the position would break even!

You must have sufficient funds available to provide the capital you need to start. They Can be a Good Short Term Investment If you are looking for an investment opportunity that can pay off in a shorter time frame, derivatives may be a good option. While some stocks and bonds are long-term investments over the course of many years, derivatives can be days, weeks, or a few months. Because of the shorter turnaround time, they can be a good way to break into the market as well as a good way to mix short and long-term investments. Then and only then will you be making an informed decision on your investment portfolio. One of the things you will need to factor in to your investment market decision is of course the cost per trade that you will either incur or benefit from once you have chosen your commodity.