subject: Online Options Trading For Your Future [print this page] The popularity of option trading has grown over the past couple of decades, mostly due to everyone having easy access to the internet. Like penny stocks, options appeal to small investors because the initial cash outlay is smaller than actually having to purchase the assets. It is for this reason that many go swimming in the option pool without first learning how to swim. Before they know it, they are in the deep end, treading water and going under. So before you venture into this high risk high rewards from of trading you really have to do your homework. In fact, many of the online brokers have their new clients show proof of option trading experience before allowing them to trade in options.
Like most things having to do with the market, options began as way that commodities could be assured of a future price. No one knows who came up with the concept, but to hedge their bets options were created. Remember, an option is a contract between a buyer and a seller that gives the buyer the right, BUT NOT THE OBLIGATION to buy or to sell a particular asset (the underlying asset) at a later day at an agreed price. What began more than 150 years ago at the Chicago Board of Trade, Kansas City Board of Trade, the Minneapolis Grain Exchange, and the New York Cotton Exchange, has evolved into the fastest way to make or lose a fortune.
The modern trader does not hold onto an option very long. In most cases the option gets sold the same day it was acquired. The secrets to finding the right asset to option are twofold. You must look for a stock or commodity that has a lot of movement, up or down doesn"t matter. Second, there must be higher than normal volume. If you are not properly trained or at least have some options market knowledge, you can lose your investment in an instant. I am of course referring to the American market where an option may be exercised on any trading day on or before expiration. A European option may only be exercised on expiration. There are several different styles of options available. This is just one of the many things you must know about to become a successful options trader.
Your Options Are Many
Types of options are
Exchange traded options which are:
1. stock options,
2. commodity options,
3. bond options and other interest rate options
4. stock market index options or, simply, index options
5. options on futures contracts
And...
Over-the-counter options:
1. interest rate options
2. currency cross rate options, and
3. options on swaps or swaptions.
I don"t profess to being an expert, but I do know of some. I obviously don"t have the time to go into all the details now, but at my site Market Mentalist you will find all you need to know about investing online. There is an abundance of articles and product information on Online Options Trading Offers a Great Future
by: Avery Mann
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