An option gives a person the right but not the obligation to buy or sell something. An option is a contract between two parties wherein the buyer receives a privilege for which he pays a fee (premium) and the seller accepts an obligation for which he receives a fee. The premium is the price negotiated and set when the option is bought or sold. A person who buys an option is said to be long in the option. A person who sells (or writes) an option is said to be short in the option.
What is a Call Option? What is a Put Option?
Call option and put option trading is easier than most people think. If you have never traded a call option, you have come to the right place. Not only is it easy to learn, but trading puts and calls should be part of every stock investor's strategy.
This introduction to put and call option trading provides all the definitions, explanations, examples, and real-life trading tips needed to help the beginner trader learn to trade puts and calls successfully!
Trading puts and calls provides an excellent way to lock in profits, maximize gains on short terms stock movements, reduce overall portfolio risk, and provide additional income streams. Best of all, trading puts and calls can be profitable in bull markets, bear markets, and sideways markets. If you are trading stocks but you are not using protective puts, buying calls, or if you have never sold a covered call option, then you are not making as much money as you can and you are missing out on some nice profits. The recent market volatility has provided unusually profitable opportunities.
Once the average investor has reached a comfort level trading stocks, then he should begin learning what a call option is and how to trade a call option. Then, once he understands what a call option is and how to trade them, then he should expand his knowledge base to include the trading of put options. Once he understands the basics of puts and calls, then he should implement them in his regular trading and portfolio management strategy.
he beginning puts and calls trader, however, often finds it difficult to transition from trading stocks to trading options. But trading options is easier than you might think--provided you start with learning the basics. This website is for exactly that: teaching you the basics of trading a call option and a put option.
Any successful trader should be implementing a strategy that includes both stocks and options. Why are puts and calls important? Trading puts and calls is important because trading them allows you to make more money than trading just stocks! There is a time for trading stocks and there is a time for trading puts and calls. But most of the time you should be trading all three: stocks, puts and calls. Keep reading to learn more about how to make your first call trade.
Understanding puts and calls is easy if you commit a little time to reading the following pages that describe puts and calls options in a very clear and concise manner of definitions, examples, and my personal trading tips. As an experienced stock investor, puts and calls trader, and a life-long educator, I created this website to introduce and explain puts and calls to the average investor.
If you don't have the basic understanding of puts and calls, however, trading options can also be very expensive. Because of the short life of options, profits and losses can add up quickly. The typical stock investor that starts trading puts and calls usually does not have a good understanding of the forces at work, they lose money on their first few trades, and then they throw their hands up in the air and say 'It's too confusing--never again.' Keep reading so this doesn't happen to you!
Put and call option trading is like everything else--you must commit a little time to understand the basics. Then once you start understanding it you will make some money at it. And once you start making a little money at it, then you will start enjoying it and look forward to the stock market opening every morning.
I have already helped thousands of people understand what a call option is and how to trade them. I have written this Introduction to Call Option and Put Option Tradingto help you learn what a call option and a put options is, and to show you how easy it is to trade them.
If you read sequentially through the links in the Table of Contents on the top right side of this page, in less than 60 minutes you will have a very clear understanding of:
- What are stock options?
- What is call option?
- What is a put option?
- My Top 10 Option Trading Tips
- Option value and pricing
- How to buy a call option
- Who is the Best Option Broker
- and How to write a covered call option
If you have never traded puts and puts before--don't worry! You have come to the right place. I made my first call option trade in 1985 and have been trading calls & puts ever since. I have an MBA in Finance, I have read dozens of the best books on put and call option trading, I have subscribed to several of the best options newsletters, I have used many of the best discount option brokers websites, and I have made thousands of puts and calls trades in my lifetime.