Option Trading-a Quick Guide by David Baxwell

Stock options trading is enjoying a surge in popularity. Everyone knows that options aid the investor in maximizing profit, but for the trader just starting out the concept can seem overwhelming. Here I will discuss what options are, as well as different types of options. Also, I will show how the trader who uses options could earn more than those that do not, and the macd indicator that visualizes the average between the two fluctuating prices.

Broad and general categories are the two types of options. Call option and put options are also available. The choice is yours when it comes to your thought about using call or put options in option trading as it depends on one's belief about where the market will go and how one wants to make cash on their judgment.

Option prices can be confusing to the new option trader. The price that is quoted is for one option, but they are always sold in lots of 100, so the minimum purchase would be 100 times the quoted price. In option trading, if you make the minimum purchase on an option that costs 10 cents, then you will actually have to pay 10 dollars, plus whatever commission your broker may charge.

When you purchase a call option you have acquired the right to buy a stock at a certain price until the option expires. That price is known as the strike price. If the strike price is lower than the current market price of the stock, then exercising the option results in a profit when the stock is sold on the open market.

If you choose the put option then you have the right to sell the stock at a particular price in specific time. But you are not bound to do so. So, if the trader feels that the stock value is going to fall in future then he would invest in a put option. An example is given to make the concept clearer.

Option trading is not as confusing as some traders make it out to be. The concept of purchasing calls and puts are relatively straightforward and simple. As we have seen, the leverage potential and limited risk features found in trading options can be very attractive. For some traders, these are the two reasons that they get excited about stock option trading.


Stock options trading is enjoying a surge in popularity. Everyone knows that options aid the investor in maximizing profit, but for the trader just starting out the concept can seem overwhelming. The MACD indicator visualizes the average between two fluctuating prices.

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