This is your introduction to a versatile investment tool, the stock option. Thousands of investors use options every day to protect their portfolios -- and rack up big potential profits. What's more, options offer strictly limited risk... more
Surprisingly, options have been around for thousands of years. Ancient Greeks, Romans, and Phoenicians used options to insure shipments of merchandise from local ports. Losing ships at sea was not uncommon and options allowed ship owners and merchants to hedge their vessels and cargoes... more
Basic Options Strategies
Now that you understand the basics of options, what can you do with the information?... more
Options Exchanges
When you get a rain check from a supermarket, you have to return to the store that issued it in order to exercise your rights. When dealing with stock options traded on an exchange, the options are fungible (interchangeable) and there is a central clearing house... more
Pricing Options
If all required information is known, then investors should be able to determine the "real", or theoretical value, of an option by using a mathematical model... more
Volatility
Volatility measures the tendency of a stock to undergo price changes. Daily price changes (from one day's closing price to the next) measured as a percentage, are collected and subjected to statistical analysis... more
Psychology of the Marketplace
Following the herd is not the path to glory, although it is extremely difficult to see at the time. It is easy to get caught up in the emotions of a surging stock market... more
The Greeks
In the options universe, "Greeks" refers to Greek letters used to quantify certain characteristics -- price, time decay, and more -- associated with options... more
Hedging
This strategy rewards the investor who correctly anticipates the timing and direction of a move in the underlying asset... more
Options Spreads
A spread is a hedged options position consisting of 2 or more different series, or legs, on the same underlying asset. At least one of the legs is bullish and one bearish... more
Risks of Option Trading
Like any investment vehicle, there are risks associated with options... more
Option Writing
One of the more advanced strategies an options trader can employ is option writing. Option writing can be very profitable and rewarding when done properly. However, as with any trading strategy, if you attempt to do it without proper risk management rules in place, the results can be devastating... more
Metals and Oils Options
A commodity is a fungible (interchangeable with other products of the same type) physical substance, whose price is determined by supply and demand... more
Currency Options
The currency markets are probably the most dynamic market in the world. They react almost instantaneously to global political and economic events... more
Stock Indexes
Stock Indexes are options on indexes, or groups of stocks and stock market sectors... more
Straddles & Strangles
You believe company JKLM is going to make a major announcement, but are not certain how investors will react. You are convinced the stock price is going to break out dramatically, but in which direction? You might want to consider buying BOTH a put and a call, in either a straddle or a strangle... more
Options FAQ
Still have questions about options? We've compiled answers to the most frequently asked questions about options investing... more
