Option stock trading future
What are the profits and losses in case of a Stock Futures position? What is the market lot for Stock Futures? Why are the market lots different for different stocks? What are the different contract months available for trading? What is spread trading on BSE?
As an investor, how do I start trading in Stock Futures? What securities can I submit to the broker as collateral?
How does an investor, who has the underlying stock, use Stock Futures when he anticipates a short-term fall in stock price? How can an investor benefit from a predicted rise or predicted fall in the price of a stock?
What is pair trading? Any attempt to have call options explained is not easy, and it normally takes a while it took me at least a week to fully grasp the concept of what a call option is, and what it represents. There are many different types of options out there, and each one would require its own website worth of information to grasp each individual concept. That already sounds a little convoluted…see, I told you that it may take a few days to sink in. Think about it this way…if you were at a department store and you wanted to buy a DVD player that was on sale, but then you found out that the last one was sold before you had a chance to get to it, most stores will allow you to create a raincheck for that item.
The whole point of buying call options is that you expect the price to rise in the relatively near future. So if Corn is trading at For instance, as of this writing, with Corn trading at about Another HUGE benefit of buying call options is the fact that unlike buying the futures contract your risk is limited; with buying options, you can never lose more than your initial investment. So with our Corn call option example Once you buy the option, your risk is set, and you now have the right to buy one Corn contract stock at the If Corn were to have a major spike in price and shot up to For example, if you were to buy a call option on Corn with a strike price of So, buying a Corn call option with a But if Corn were to have a dramatic and quick spike in price, and it jumped up to Nonetheless, I hope this little diddy on call options explained has at least begun to bring some clarity to this detailed area of investing.
If you understand the effect that volatility has on the options market, you will understand how sometimes extraordinary profits can be pulled from trading commodity options with very little relative investment.
When you trade options, you are basically trading volatility, nothing more, nothing less. Remember the option is only going to be as stable as the futures contract that the option represents.
Volatility is basically reflected in the sharp rises and drops in option premiums, and the degree of fluctuation that those premiums experience. If you use it right, volatility can be your best friend. Once you understand a little about market psychology, you can truly exploit volatility to create some serious profits in a relatively short period of time.
Before I get sidetracked, let me mention the fact that there are two types of volatility in commodity options trading and really all options trading for that matter: