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Options trading can sound complicated and risky to novices, so beginners often steer clear. While their hesitation is understandable, not much is required to get started — but the process ...
An options chain offers easy-to-access data about a stock’s available options, providing traders a quick way to find relevant information. A chain is valuable because:
A trader who expects a stock's price to increase can buy a call option to purchase the stock at a fixed price (strike price) at a later date, rather than purchase the stock outright. The cash outlay on the option is the premium. The trader would have no obligation to buy the stock, but only has the right to do so on or before the expiration date.
Here the option costs a total of $100, so the option doesn’t break even until the stock hits $21 per share. But as long as the stock closes above the strike price at expiration, it’s worth at ...
An option that conveys to the owner the right to buy something at a certain price is a "call option"; an option that conveys the right of the owner to sell something at a certain price is a "put option". Both are commonly traded, but for clarity, the call option is more frequently discussed.
A typical option strategy involves the purchase / selling of at least 2-3 different options (with different strikes and / or time to expiry), and the value of such portfolio may change in a very complex way. One very useful way to analyze and understand the behavior of a certain option strategy is by drawing its Profit graph.
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