This is something that is not exactly ?new?, but which has definitely been in existence for quite a while. It originated in Chicago in the early 1970s, and is something done by investors all around the world today. It is a unique way to enjoy profits without engaging in a huge amount of risk.
Options trading is one of the more popular stock market trading systems in the modern markets because it allows someone to do a bit of research, analyze an individual vehicle for profitability, and then purchase a contract or ?option? to buy or sell that particular item at a fixed price.
For example, unlike a regular stock investment, options trading would allow an individual to purchase a ?call option? for a particular stock. This would be a contract that sets out very specific terms, such as a minimum of 100 shares, the set price for purchase, and the date that the terms of the contract expire. This would then give the individual the opportunity to exercise the contract at a later date and actually purchase costly shares for a lower price, or they could also profit by selling their contract for profit too.
The same sort of system applies to someone already holding an investment vehicle, such as a stock, and if the markets were indicating a trend towards declining they could purchase a ?put option? that protected their asset and locked them into a fixed selling price instead. This would allow them to prevent loss, but would not obligate them to sell the shares at the time the contract came to an end.
Of course, options trading is going to involve more than just buying and selling issues, and many different factors will always have an effect on the outcome of any decision. This means that it is a good idea to engage in some study, education, and research before creating an individual plan or system for adding options to the investment portfolio.
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