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In finance, an option is a contract which conveys to its owner, the holder, the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option.
Option values vary with the value of the underlying instrument over time. The price of the call contract must act as a proxy response for the valuation of: the expected intrinsic value of the option, defined as the expected value of the difference between the strike price and the market value, i.e., max[S−X, 0]. [3]
The most bearish of options trading strategies is the simple put buying or selling strategy utilized by most options traders. The market can make steep downward moves. Moderately bearish options traders usually set a target price for the expected decline and utilize bear spreads to reduce cost.
This options trading strategy is the flipside of the long put, but here the trader sells a put — referred to as “going short” a put — and expects the stock price to be above the strike ...
Trading options is generally more complicated than trading stocks, so you must know a few key things before diving in. If you want to trade options, be sure to avoid these common mistakes.
The post 6 Stock Option Trading Strategies to Consider appeared first on SmartReads by SmartAsset. Options give investors ways to profit whether stocks rise, fall or hold steady. But they also ...