Market Basics
The Basics
What is an Option?
Market BasicsOptionsAn option is a type of security that grants the trader the right to buy or sell an underlying asset. The underlying instrument is commonly a stock, but options can also be traded on a variety of ETFs and futures. There are two...
Why Trade Options?
Market BasicsOptionsTrading options offer several advantages to just trading stocks. Limited Risk – Buying a call or put option offers the trader unlimited potential profit and limits maximum risk to the price premium paid for the option. Conversely,...
What You Need to Know About Trading Options
Market BasicsOptionsTrading options will require a trader to commit to understanding the terms used when trading options, as well as to consider some additional tools to trade. Options trades are traded on an options chain. There are a lot of options...
Understanding the Risks
The Risks of Buying Call and Put Options
Market BasicsOptionsMany options traders start out buying calls and puts; these are directional trades that allow you to control more of a stock with less capital, offering potentially unlimited profit potential with defined risk. Buying calls and...
The Risks of Covered Call Writing
Market BasicsOptionsOverview Stock trading gives investors the opportunity to own a small piece of a company. You can buy shares in some of the most incredibly diverse and innovative companies from all over the world. Some stock traders are passive,...
Overnight Price (Gap) Risk
Market BasicsOptionsOverview Stocks and stock options trade for a limited time each weekday, generally 9:30 am ET to 4:00 pm ET. There is also a pre-market trading session that starts as early as 4:00 am ET and a post-market trading session that goes...
The Assignment Risks of Writing Call and Puts – Covered or Not
Market BasicsOptionsOverview Writing options, which is also called selling options, alone or as part of a covered strategy, has unlimited risk potential in your account when writing a call option, and the maximum risk for writing a put is if the...
The Risks Associated with Naked Call and Put Writing
Market BasicsOptionsOverview Writing options, which is also called selling options, alone or as part of a covered strategy, has unlimited risk potential in your account when writing a call option, and the maximum risk for writing a put is if the...
Assignment Risk on ‘Limited Risk’ Options Spreads
Market BasicsOptionsOverview The term ‘limited risk’ is thrown around a lot when it comes to options trading and specifically around options spreads. But anytime you are writing an option, even if it is covered, there are potential risks that can far...