By: Melody
We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics' articles, you should be able to understand options and how to utilize options to either profit or protect your stock.
Going into options basics, the first thing that we should be discussing is what options are.
A stock option is a contract that gives the holder the right to buy (a call) or sell (a put) on a particular stock, at a predetermined price (the strike price), on or before a particular date (the expiration date). For everyone who buys a stock, there is someone who sells it. Likewise, for every option (call or put) buyer, there is an options seller.
For example, Adobe is at $461 a share at this moment, and I think it will continue going up in the near future, what should I do?
After clicking on the Exp. Dates, there should be a drop-down list with different expiration dates for all the options.
In order to demonstrate, let's just say that I believe ADBE will go up to $500+ a share by December.
In this case, I will be looking at options that expire on or after December.
And because I think that ADBE will go up to $500+ a share, I will select Call options with a strike price of around $500.
This is what I see:
We can see that the options price is $10.72, this means in order to buy 1 contract(unit) of this call option I need to pay $10.72*100=$1072 right now.
Today, we are simply learning to check option prices.
In order to know how to properly pick which options to buy, we have to further learn to understand the options table.
Please stay with us for more on options basics!
If there is anything that you didn't understand in today's Options Basics article, simply leave a comment below and we will try to explain more to you!
For more investment knowledge and trends, welcome to Courses in the Community.
