Sunday, December 30, 2007


Options trading is a very fast way to either make money hands over fist or go broke in a hurry. This kind of "playing" the stock market is very risky and takes a lot of guts, especially if you do not have a lot of money that you can afford to lose. It takes time and experience to get a good feel for options trading. In its simplest explanation, an OPTION to buy or sell a certain stock is bought or sold, rather than the stock itself. It allows someone to buy or sell the stock within a certain period of time, at a certain price, called the "strike price." The advantages are cost and volume. Options are much cheaper than the associated stock. For example, an option for a stock selling for, lets say, $10.00 a share, may be only .20 a share. One hundred shares of the stock would cost $1,000.00; the option for 100 shares, called a "lot," would cost only $20.00. The primary types of options are Calls and Puts. A Call option is traded if the stock is thought to rise; a Put option is traded if it is believed that the stock will go down. To be continued...

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