Wednesday 7 October 2009

Option basic

So before we go on with trading, we need to first learn the basic. As I said before, my trading involve a combination of share trading and option trading. So what is Option. Option is a kind of deriviatives from the market. There is two main type of option. A Call option and Put option. So let say we use stock option as an example. The buyer of Call option has the right to buy a certain stock at a specific price within a certain timeframe. The buyer of Put option has the right to sell their certain stock at a specific price within a certain time period. The writer (which is the guy you create this option) of Call option has the obligation to sell a certain stock at a specific price when the buyer exercise his/her right within that timeframe. The writer of Put option has the obligation to buy a certain stock at a specific price when the buyer exercise his/her right within that timeframe. Sound complicated .. I will give more example at a later post...

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