BROUGHT TO
YOU BY LEARNING SHARING
INVESTING EXPERIENCE. THE NEW
AND IMPROVED VERSION OF THE
TRADING AT THAT YOU ALREADY
LOVE IF YOU ARE AN EXPERIENCED
TRAITOR YOU KNOW THAT THERE ARE
A LOT OF CHOICES WHEN IT COMES
TO INVEST IN IN SECURITIES BUT
TODAY WE'RE GOING TO FOCUS ON
OPTIONS, TRADING OPTIONS FACING
CHALLENGING, BUT IT'S ACTUALLY
PRETTY SIMPLE TO GET A GRASP ON
THINGS IF YOU KNOW A FEW KEY
COMPONENTS. FROM STOCKS AND
ETFS DIVERSE
IT DIFFERENT.
>> BUYING A DIVERSE INVESTING
CURVE ARE GENERALLY CONSTRUCTED
WITH SEVERAL ASSET CLASSES AND
OPTIONS OR JUST ANOTHER
ASSET CLASS. SO TODAY WE'RE
GOING TO BREAK DOWN WHAT YOU
NEED TO KNOW WHEN IT COMES TO
TRADING OPTIONS, SO FIRST, WHAT
IS AN OPTION. LET'S LOOK AT
THINGS IN SIMPLE TERMS FIRST AN
OPTION IS AN AGREEMENT BETWEEN
THE BUYER AND THE SELLER THE
GIVES THE FIRE THE RIGHT TO BUY
OR
SELL STOCK AT A SET PRICE BY A
SPECIFIC DATE WHEN TRADING
OPTIONS INVESTOR HAS THE RIGHT
TO EXERCISE THAT OPTION AT ANY
POINT UP UNTIL THE
EXPIRATION DATE.
>> SO HOW DOES OPTIONS TRADING
WORK. WELL, THERE ARE LOTS OF
DIFFERENT KINDS OF OPTIONS BUT
FOR NOW LET'S FOCUS ON CALLS
AND PUTS CALL OPTIONS GIVE YOU
THE RIGHT TO BUY A STOCK
BECAUSE YOU'RE DECIDING NOW
WHAT PRICE YOU WILL PAY IN
THE FUTURE, YOU'RE ESSENTIALLY
MAKING A BET THAT THE STOCK
PRICE WILL BE HIGHER THAN THE
PRICE YOU AGREED TO PAY NOW PUT
OPTIONS ON THE OTHER HAND GIVE
YOU THE
RIGHT TO SELL A STOCK SO IN
THIS CASE YOU MIGHT THINK THAT
THE PRICE WILL GO DOWN SO YOUR
GREEN NOW TO SELL THE STOCK AT
A
PRICE HIGHER, THEN WHAT YOU
THINK IT WILL BE AT IN THE
FUTURE SO THEY'RE MAKING A BET
ON WHICH WAY THE STOCK WILL
MOVE WHY NOT JUST BUY THE STOCK
ITSELF. WELL FOR ONE THING AN
OPTION USUALLY COST A FRACTION
OF THE PRICE OF THE
UNDERLYING STOCK.
>> AND THAT'S THE POTENTIAL FOR
OUTSIZE RETURNS WITH LESS
DOWNSIDE BUT THAT'S NOT ALWAYS
THE CASE SO LET'S PUT IT INTO
PERSPECTIVE HERE. LET'S SAY
THAT THE STOCK IS TRADING AT A
$110 BUT I THINK THEORETICALLY
THAT
THE SHIP THERE'S WILL RISE IT
BY A 100 A 100 CALL OPTIONS AT
$2 EACH SO MY TOTAL COST WE'LL
BE ABOUT
$200. MEANWHILE, IF I WERE IN
THE EQUITY MARKET, I WOULD BUY
A 100 SHARES AT A $110 TO COST
ME ABOUT
$11,000. SO IN THIS FIRST
SCENARIO. LET'S SAY THAT SHARES
OF THE STOCK RISE TO $120 FOR
MY
OPTION TRADE I HAVE THE RIGHT
TO BUY SHARES AT A $110 SO IF I
SELL IT AT THE MARKET PRICE OF
$120. FOR THOSE
100 SHARES
I GAIN A $1000 TOTAL MINUS THE
ORIGINAL TO HOLOCAUST MY PROFIT
WOULD BE ABOUT $800
ON THE OTHER HAND FOR MY EQUITY
TRADE MY POSITION IS NOW WORTH
$12,000. SO
I HAVE ABOUT A $1000 PROFIT
THAT IS MORE THAN WHAT I GOT
THE OPTIONS TRADE BUT I DIDN'T
HAVE TO MAKE THAT ORIGINAL
$11,000 INVESTMENT.
>> SO NOW ON THE DOWN SIDE,
LET'S SAY THAT SHARES FALL
IT'S ALL REMEMBER BUYING CALL
PUT YOU UNDER NO OBLIGATION TO
BUY SHARES AT THAT ORIGINAL
HIRE $120 IN THIS CASE, YOUR
ONLY LOSS NOW
IS THAT INITIAL $200 ON THE
OTHER HAND FOR BY EQUITY TRAIN.
MY INVESTMENT IS NOW
NOW WORTH ONLY $10,000 FOR A
LOSS OF A 1000 ON MY INVESTMENT
SO THE BOTTOM LINE WHILE
TRADING OPTIONS COULD HAVE SOME
POTENTIAL BENEFITS. IT CAN ALSO
BE RISKY, ESPECIALLY OF
TRAITORS USE OPTIONS TO
SPECULATE ON MAKE SURE TO DO
YOUR RESEARCH TALK TO A
FINANCIAL ADVISER BEFORE