What Is A Stock Option?

An option is a contract to buy or sell a specific financial product officially known as the option's underlying instrument or underlying interest. For equity options, the underlying instrument is a stock, ETF, or similar product. The contract itself is very precise. It establishes a specific price, called the strike price, at which the contract may be exercised, or acted on prior to the expiration date. When an option expires, it no longer has value and no longer exists.

Options come in two varieties, CALLS and PUTS, and you can buy (hold or go long) or sell (write or go short) either type. You make those choices - whether to buy or sell and whether to choose a CALL or a PUT - based on what you desire to achieve as an options investor.

A CALL is the right to buy 100 shares of stock at a fixed price per share, any time between purchase of the call and the specified deadline in the future. The time is limited. As a long call buyer, you acquire the right to buy the stock and as a short call seller, you grant the right to someone else. A short call seller (writer) must also be willing to deliver or has the obligation to sell 100 shares at the strike price if the long call buyer (holder) exercises the option.

A PUT is the opposite of a call. It is a contract granting the right to sell 100 shares at a fixed price per share and by a specified expiration date in the future. As a long put buyer, you acquire the right to sell the stock and as a short put seller, you grant that right to someone else. A short put seller (writer) must also be willing to acquire or has the obligation to buy 100 shares at the strike price if the long put buyer (holder) exercises the option.

Long-term Equity AnticiPation Securities (LEAPS) are simply long-term options that expire at dates up to 39 months in the future, as opposed to shorter-dated options that tend to last no longer than nine (9) months.

RISKS WITH OPTIONS TRADING

Option trading is risky so your funds should be your speculative capital or money you can afford to lose. You should only use funds that you are willing and able to comfortably lose.

Investments in the securities markets, and especially in options, are speculative and involve substantial risk. You can lose your entire investment. Individual results may vary from those achieved by our financial newsletter recommendations and no actual investment positions are taken by the newsletter. Only you, with the assistance of a qualified securities professional (personal financial adviser or broker), can determine what level of risk is appropriate for you and how, when, and where you should participate in the options markets. Our recommendations should only be considered by sophisticated investors who are aware of the risks in options trading.

For detail information on options risks, see Chapter X of The Options Clearing Corporation (OCC) "CHARACTERISTICS AND RISKS OF STANDARDIZED OPTIONS" - booklet.

For more information go to http://www.stockoptionking.com/

Article Source: http://EzineArticles.com/?expert=Theodore_Peroulakis

Read more!

Basics of Forex Trading

This article gives an introduction about the basics of trading Forex online, a brief explanation of the markets and the major benefits of trading forex online. Foreign exchange or forex are all terms used to describe the trading of the world's many currencies. The forex market is the largest market in the world, with trades amounting to more than 1.5 trillion dollars every day. The foreign exchange market has no central clearing house or exchange and is considered an over-the-counter (OTC) market. Forex traders are generating incredible wealth day after day from the comfort of their home. Foreign exchange is normally traded on margin. A relatively small deposit can control much larger positions in the market.

Forex trading takes place directly between the two counterparts necessary to make a transaction, whether over the telephone or on electronic brokerage networks all over the world. This is a trade that includes simultaneous buying of one currency and selling of another one. There are two reasons to buy and sell currencies. About 5% of daily turnover is from companies, and governments that buy or sell products and services in a foreign country must convert profits made in foreign currencies into their domestic currency. The other 95% is trading for profit, or speculation. The currency combination used in the trade is called a cross (for example, the Euro/US Dollar, or the GB Pound/Japanese Yen.).

The market is called the spot market because trades are settled immediately, or "on the spot". One of the major benefits of trading forex is the opportunity to trade 24 hours a day from Sunday evening (20:00 GMT) to Friday evening (22:00 GMT). Unlike stock trading, currency trading on the Forex market is not cut short at the "close" of each day's trading. The benefit of Forex being a 24 hour a day market is that there are little or no gaps in the market, meaning there is no chance that prices will close one day and reopen the next day. The fact that forex is often traded without commissions makes it very attractive as an investment opportunity for investors who want to deal on a frequent basis.

Since the market is always moving, there are always trading opportunities, whether a currency is strengthening or weakening in relation to another currency. When you trade currencies, they literally work against each other. Different currencies pay different interest rates. The interest rate differential doesn't usually affect trade considerations unless you plan on holding a position with a large differential for a long period of time. This is one of the main driving forces behind foreign exchange trends. You can have both a positive and a negative interest rate differential, so it may work for or against you when you make a trade. It is inherently attractive to be a buyer of a currency that pays a high interest rate while being short a currency that has a low interest rate. Fortunately, there are no daily limits on foreign exchange trading and no restrictions on trading hours other than the weekend. This means that there will nearly always be an opportunity to react to moves in the main currency markets and a low risk of getting caught without the opportunity of getting out.

A forex trading method with a high winning percentage is rewarding psychologically, keeps your morale high and is enjoyable to trade. A string of profits will build your confidence. Losses have to be kept small and wins should be larger than losses. You can make big money working only a few hours a day or week on your computer. You can trade from anywhere in the world where there is an internet connection.

Andrew Daigle is the owner, creator and author of many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and a ForexBoost blog for keeping online Forex trading records.

Article Source: http://EzineArticles.com/?expert=Andrew_Daigle

Read more!

Free FOREX Trading E-books

From Wikipedia, the free encyclopedia, The foreign exchange (currency or forex or FX) market exists wherever one currency is traded for another. It is by far the largest financial market in the world, and includes trading between large banks, central banks, currency speculators, multinational corporations, governments, and other financial markets and institutions. The average daily trade in the global forex markets currently around US$ 1.9 trillion. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks.

Free FOREX Trading E-Books are available for download all in one page at http://www.hubd.cn/forex/

Read more!

Learn Forex Currency Trading Online

Forex currency trading is now one of the hottest trading markets in the world today. So by learning about Forex currency trading online you could not only open the door to some incredible investment opportunities, but you may also be able to build a much more diversified investment portfolio for yourself. So how you learn forex currency trading online? Well in this article I will attempt to provide you with some information that will answer this question.

Recently, many people have become interested in forex currency trading online possibly because they heard of the large amounts of money that can be made. As a result, many big companies have now set up online currency trading operations. These websites are certainly of great help to anyone who is actually interested in learning about online Forex currency trading for themselves.

These forex currency trading websites provide you with training methods where you can learn about the subject of online Forex currency trading very easily. They will provide you with details on what are the securest and safest places for you to conduct your online trading and also how to use the various online tools and resources.

There is one particular site where you can learn about Forex currency trading online. It is the "Forex Online Trading Program" which as been created by the National Futures Association (NFA) at www.nfa.futures.gov. It starts by teaching you the basics of forex currency trading and as you progress through each step, it will provide you with the answers to any questions you may have about forex currency trading.

It is important when you are looking for a site that provides online Forex training to choose one where you will be comfortable and will be able to easily follow the information that are provided to you. Forex forums are an good source of information and you can get answers to questions you have from more experienced forex traders.

By remembering the above points, you should be able to find a good forex currency trading website that will help you find some incredible investment opportunities in the future.

Ricky Lim runs a learn forex trading online site for beginners at http://www.learn-forextrading.net. Visit his site today for more forex tutorials and articles.

Ricky Lim

Read more!