Replies to post #2914 on Investor Help (NO Ihub questions)

[FollowNoOne]

Per the dictionary on Investopedia.com:

http://www.investopedia.com/terms/o/option.asp

Definition of 'Option':

A financial derivative that represents a contract sold by one party (option writer) to another party (option holder). The contract offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).


Call options give the option to buy at certain price, so the buyer would want the stock to go up.

Put options give the option to sell at a certain price, so the buyer would want the stock to go down.

Investopedia explains 'Option':

Options are extremely versatile securities that can be used in many different ways. Traders use options to speculate, which is a relatively risky practice, while hedgers use options to reduce the risk of holding an asset.

In terms of speculation, option buyers and writers have conflicting views regarding the outlook on the performance of an underlying security.

For example, because the option writer will need to provide the underlying shares in the event that the stock's market price will exceed the strike, an option writer that sells a call option believes that the underlying stock's price will drop relative to the option's strike price during the life of the option, as that is how he or she will reap maximum profit.

This is exactly the opposite outlook of the option buyer. The buyer believes that the underlying stock will rise, because if this happens, the buyer will be able to acquire the stock for a lower price and then sell itfor a profit.

[Joe C]

I am doing my research on trading options too. I have been gathering info for months and I am just about ready to dive in. One of the best persons that I have found to help with understanding how to choose the right stock to play and the best strike price to enter at and the reasons why and when and how to exit with a profit is Cam24Trader. He has a huge selection of videos on YouTube and a huge following. Search YouTube for his name and subscribe, I don't think you will be disappointed. He is a conservative trader and does well. His website is thestockgarage.com he posts a daily watch list that covers penny stocks, big board stocks and options that he trades and that are good setups to trade. Check it out if you want to look at his past watch list and compare them with what actually happened in the market. Also check out
stockhaven.com, they have a live chat room that is free to join where you can get real time trades and setups that are actually being traded at that moment. Good luck with your trading my friend. I am sorry about such a long post but I hope it helps you as much as it did me. Happy trading.