Option Trading File

Options trading involves buying or selling contracts that give you the right—but not the obligation—to buy or sell an asset (like a stock or ETF) at a set price within a specific timeframe.

: The cost you pay (as a buyer) or receive (as a seller) for the contract.

: You own the stock and sell a call against it. This generates immediate income (the premium) but caps your potential profit if the stock price soars. OPTION TRADING

: One contract typically controls 100 shares, allowing for significant market exposure with less upfront capital than buying shares outright. Basic Strategies

: You buy a put if you expect the price to fall. This is often used for speculation or as "insurance" for stocks you already own (a Protective Put ). Options trading involves buying or selling contracts that

: The date the contract expires. If not used by then, it usually becomes worthless.

: Risk is strictly limited to the premium paid. However, options are time-sensitive; if the stock doesn't move as expected before expiration, the entire investment can be lost. This generates immediate income (the premium) but caps

: The agreed-upon price at which the asset can be bought or sold.