Options Trading Essay example -- essays research papers

Options and the InvestorMost people know that an plectron is a pick. It is a choice to buy that late compact disc, a choice to fire to leather on a new car, or a choice to speculate in the market. Options are a way to reduce jeopardizeiness associated with trading stocks and are quite advantageous in a capitalistic society. An option is a contract between two parties to purchase or sell a commodity futures contract at a determine price within a specific time period. Every option transaction has an option buyer and an option seller (4, p. 236). The advent of nonionic options trading by the bread mature Options Exchange created a new way to play the market. Options stinker be used to hedge stake and to take profits larger than would be possible by buy and selling stock. This result can be accomplished using a variety of combinations to be discussed later in this paper. These strategies can be reusable as pertaining to the options trader who wants to make the most profit with the least join of risk. Elementary pricing of options will help the reader in mind some of the differences in premiums and why the differences are so large. The Chicago Board Options Exchange has changed the way that options are traded through advances in technology to the transmit that options are bought and sold instantaneously with almost a 100% batten of credibility. This is one of the main reasons for the options explosion.OptionsBasic options have existed for eons and have been used as investment funds strategies for thousands of grades. The concept was definitely used by societies other than ours, as illustrated by this excerpt from Aristotles Politics (2, p. 16)There is an anecdote of Thales the Milesian and his financial device, which involves a principle of universal application, but is attributed to him on account of his write up for wisdom. He was reproached for his poverty, which was supposed to show that philosophy was of no use. According to the story, he knew by his skill in the stars while it was yet winter that in that location would be a great harvest of olives in the coming year so, having a little money, he gave deposits for the use of each the olive presses in Chios and Miletus, which he hired at a low price because no one bid against him. When the harvest time came, and many wanted them all at once and of a sudden, he let them out at any r... ...the secrets of trading options. It is shown in the pages preceding that using options to hedge investment risk, or using options alone can almost eliminate the calamity to lose big when investing. The advent of organized options trading by the Chicago Board Options Exchange created a new way to play the market. Options can be used to hedge risk, and to take profits larger than would be possible by buying and selling stock. Accomplished strategists have through with(p) very well in the options market, because with an increased repertoire of investing strategies, the investor who b alances risk with reward will have the most success trading options.References1.Kolb, Robert, Options An Introduction, (Miami, FL Kolb produce Co., 1991).2. Gastineau, Gary, The Options Manual, 3rd variance (New York, New York McGraw-Hill Book Co., 1988).3.Trester, Kenneth, The Compleat Option Player, 4th Edition (New York, NY Inves Trek Publishing, 1984).4.Caplan, David L. The New Options Advantage (Chicago, IL Probus Publishing, 1995).5.http//www.cboe.com/education/Options and the InvestorDavid Walkerpolitical economy 185