On a basic level what are options and options trading?
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You pay money for the ability to buy or sell a stock at in a set period of time. A call option is one that lets you buy it during a set time period, and a put option lets you sell it during the defined period.
You pay money for the ability to buy or sell a stock at in a set period of time. A call option is one that lets you buy it during a set time period, and a put option lets you sell it during the defined period.
You pay money for the ability to buy or sell a stock at in a set period of time. A call option is one that lets you buy it during a set time period, and a put option lets you sell it during the defined period.
Employee stock options at their most basic form are a perk to allow employees to buy shares in their company at a discounted rate.
Let’s say a company’s share price is £1.20, they’d typically offer options at a slight discount, to aid my maths here let’s say £1.00
You as an employee sign up for £10 per month of stocks for 5 years = £600 invested. This would typically be paid direct out of salary. And depending on the tax laws of the country you’re in may be deducted pre tax for a further benefit.
If at the end of 5 years the share price has gone up to £2.00, you’ve made a £600 profit.
If they’ve gone down to £0.50 you take your £600 and walk away.
Employee stock options at their most basic form are a perk to allow employees to buy shares in their company at a discounted rate.
Let’s say a company’s share price is £1.20, they’d typically offer options at a slight discount, to aid my maths here let’s say £1.00
You as an employee sign up for £10 per month of stocks for 5 years = £600 invested. This would typically be paid direct out of salary. And depending on the tax laws of the country you’re in may be deducted pre tax for a further benefit.
If at the end of 5 years the share price has gone up to £2.00, you’ve made a £600 profit.
If they’ve gone down to £0.50 you take your £600 and walk away.
Employee stock options at their most basic form are a perk to allow employees to buy shares in their company at a discounted rate.
Let’s say a company’s share price is £1.20, they’d typically offer options at a slight discount, to aid my maths here let’s say £1.00
You as an employee sign up for £10 per month of stocks for 5 years = £600 invested. This would typically be paid direct out of salary. And depending on the tax laws of the country you’re in may be deducted pre tax for a further benefit.
If at the end of 5 years the share price has gone up to £2.00, you’ve made a £600 profit.
If they’ve gone down to £0.50 you take your £600 and walk away.
an option is a contract that gives you the right to buy or sell a security at a specified price, within an agreed upon window of time. In other words, it’s a bet put down in writing.
let’s break that down.
1. An option is a contract. That means it’s an agreement between to parties. Every option has a party and a counter-party who is on the opposite side of the bet as you.
2. An option comes with a fee. They aren’t free. You have to buy options in order to have the right to buy or sell.
3. An option comes with an expiration date. If you haven’t exercised the option before then, it becomes null and void.
4. An option that gives you the right to buy a security is a Call option. An option that gives you the right to sell a security is a Put option. You would buy a Call option if you think the security’s price is going to be higher in the future. You lock in the right to buy it at a lower price today and then buy it for that price in the future when it’s worth more. You would buy a Put option if you think the security’s price will go down in the future. You lock in the right to sell it at today’s price which you expect will be higher than what you could sell it for in the future.
an option is a contract that gives you the right to buy or sell a security at a specified price, within an agreed upon window of time. In other words, it’s a bet put down in writing.
let’s break that down.
1. An option is a contract. That means it’s an agreement between to parties. Every option has a party and a counter-party who is on the opposite side of the bet as you.
2. An option comes with a fee. They aren’t free. You have to buy options in order to have the right to buy or sell.
3. An option comes with an expiration date. If you haven’t exercised the option before then, it becomes null and void.
4. An option that gives you the right to buy a security is a Call option. An option that gives you the right to sell a security is a Put option. You would buy a Call option if you think the security’s price is going to be higher in the future. You lock in the right to buy it at a lower price today and then buy it for that price in the future when it’s worth more. You would buy a Put option if you think the security’s price will go down in the future. You lock in the right to sell it at today’s price which you expect will be higher than what you could sell it for in the future.
an option is a contract that gives you the right to buy or sell a security at a specified price, within an agreed upon window of time. In other words, it’s a bet put down in writing.
let’s break that down.
1. An option is a contract. That means it’s an agreement between to parties. Every option has a party and a counter-party who is on the opposite side of the bet as you.
2. An option comes with a fee. They aren’t free. You have to buy options in order to have the right to buy or sell.
3. An option comes with an expiration date. If you haven’t exercised the option before then, it becomes null and void.
4. An option that gives you the right to buy a security is a Call option. An option that gives you the right to sell a security is a Put option. You would buy a Call option if you think the security’s price is going to be higher in the future. You lock in the right to buy it at a lower price today and then buy it for that price in the future when it’s worth more. You would buy a Put option if you think the security’s price will go down in the future. You lock in the right to sell it at today’s price which you expect will be higher than what you could sell it for in the future.
An option is the right but not the obligation to act on something, usually at a set price within a set time period.
Example: Let’s say Amazon is trading at $100. A buy option (referred to as a Call) could be the the right to buy a share of Amazon for $110 anytime in the next 12 months. And it might cost me $10. So I pay $10 for sure right now. If the stock rises to $111 or higher, then I can exercise my right and buy it for only $110. If it doesn’t rise to $110, then I don’t exercise my option and nothing happens. If it goes to $140, then I can use my option, sell it for that and put the $30 (140-110) in my pocket, leaving me with a profit of $20 after the $10 it cost to buy it.
Options trading simply would be if a bunch of people get together and trade those options. You and I could do that right now: I think Amazon is going to tank next year, and drop to $80. I’ll sell you that right to ‘buy Amazon if it goes over $110 for only $5. You love Amazon and say deal, we write the contract and both sign. Tomorrow Amazon reports record profits and 3 department stores go out of business. We all agree Amazon is a now much better stock. You think instead of $5 it’s now worth $20. I think it’s worth $50. I offer you $25 and you accept. We just traded it.
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