Chapter 9: Introduction to Options
Once you feel like you have a good understanding of how the stock market works and are getting comfortable trading stocks, you need to start to understand how to trade options. Options appear to be complicated at first glance, but with a little reading and a little practice, option trading can become as second nature as riding a bike!
Most people don’t trade options, but they are an important tool for investors since they can earn you money several different ways. Here are 3:
- When the market moves in the direction you expect, trading options will amplify your profits.
- Protective put optionsThe right, but not the obligation, to sell a stock at a certain price before the expiration date. help you protect your profits in stocks you currently own and have achieved gains.
- Writing (selling) options can add income to your portfolio in a flat or stagnant market environment.
The language of options is a little more difficult to understand than stocks, but keep reading and we will make it crystal clear.
lease pay close attention, as this chapter can put a lot of money in your bank account (or conversely, take it away)!