Options explanation

You can buy shares the usual way -- or you can buy options. There are two main types of options: calls and puts.

A call gives you the right but not the obligation to buy a set number of shares, at a set price, within a certain period of time often just a few months. For this right, you pay a price premium.

Puts are similar, but give you the right to sell shares.

Options are often risky though there are ways to reduce your risk with them. Some folks like options because of the leverage they offer. True enough.

With options, though, timing options explanation critical. If things don't go your way in a short time frame, your option will expire worthless.

Most options expire unexercised and worthless, in fact. Those most likely to profit from options are the ones who "write" or sell the options.

That's because options are really about buying time, not stocks. Then, if it doesn't behave as you expected it to, you can either sell the shares or hang options explanation patiently.

Options are not for beginning investors, and even more advanced investors might consider steering clear. But if you're really interested, make sure you do a lot of homework before jumping in. Here are some articles on options:.