Comments on: Finally Learning the Basics of Stock Option Trading

By: MoneyEnergy

MoneyEnergy — Mon, 18 Jan 2010 21:03:25 +0000

Good point, Winston – and I’m learning more about that now, too. For readers who don’t know, there are basically four categories of options trades: buying a call, selling a call, buying a put and selling a put. It’s easiest to understand the “buying” side, but the selling side has just as much of a chance of profits.

By: Winston Dogwood

Winston Dogwood — Sun, 17 Jan 2010 18:48:40 +0000

I am always surprised that even in a preliminary discussion of option trading people don’t talk about the profound opportunity of being the option seller. Given options expire worthless 4 out 5 times I think it is shocking that there is not more press about this.

By: MoneyEnergy

MoneyEnergy — Wed, 25 Nov 2009 04:55:10 +0000

So for anyone listening who doesn’t already have the cursory intro to options, a put is the right/obligation to sell a stock (at a preset price); and a call is the right/obligation to buy a stock (at a preset price). Beyond that, more explanation is required.

By: Edwin

Edwin — Wed, 25 Nov 2009 04:14:08 +0000

You’re totally right, this stuff can be pretty complicated with the different transactions and sides to the transaction. I also like the comparison to insurance and the only thing I thought was missing was the slightly more in depth explanation because I can imagine sitting here scratching my head if I didn’t already know about options.

By: MoneyEnergy

MoneyEnergy — Wed, 25 Nov 2009 04:11:04 +0000

@Edwin – yep, you’re right. I was just saving that for the next post – but thanks for this handy description of a call option. I also need to get a bit clearer on both sides – selling a call, buying a call, what if the stock goes up, what if the stock goes down. I also know that puts and calls are usually the way options are first explained, and I just wanted to start at an even more basic level.

By: Edwin

Edwin — Wed, 25 Nov 2009 02:44:09 +0000

Good overview, the one thing I think you’re missing is an explanation of what a put or call actually means. I know you plan to do this in a future post but I think its a fairly important part of options trading.

For example, a call option allows the investor to purchase a stock for a set price up to an expiration date. The reason this works like insurance is that they pay the premium for this “option” to buy the stock in the future expecting it to go up but not risking as much money if it does not increase.