Every time. NerdWallet, Inc. Its introduction to options, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only.
They are not intended to provide investment advice. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
Introduction to Options Trading
We believe everyone should be able to make financial decisions with confidence. So how do we make money? Our partners compensate us.
This may introduction to options which products we review and write about and where those products appear on the sitebut it in no way affects our recommendations or advice, which are grounded in thousands of hours of research.
Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
Options Trading for Beginners: Strategies for Getting Started Puts and calls, strike prices and premiums, derivatives and spreads.
Chris Davis November 20, Many or all of the products featured here are from introduction to options partners who compensate us.
Read Review Visit Broker Our introduction to options trading is a comprehensive resource produced specifically for those that are considering trading options, but have very little relevant knowledge and experience. If you are completely new to trading options, then we would strongly recommend that you read this introductory section in its entirety before deciding whether it's the right form of investment for you. Options trading is a relatively complex subject, certainly when compared to some of forms of investment such as buying stocks, and many people are put off by the very idea of getting involved. It's true that there is a lot that beginners need to learn about before actually getting involved and starting to trade options, but the time and effort required can be very introduction to options in the long run. Although it's a complicated subject, it's actually not that difficult to learn about the important fundamentals.
This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Options can provide flexibility for investors at every level and help them manage risk. To see if options trading has a place in your portfolio, read through the basics of what options are, why investors use them and how to start trading.
Video not supported! What is an option? An option on a futures contract is the right, but not the obligation, to buy or sell the underlying futures contract at a predetermined price on or before a given date in the future. You could buy a house in the new city, just in case, but that may not be the best use of your capital.
What introduction to options options? An option is a contract to buy or sell a stock, usually shares of the stock per contract, at a pre-negotiated price and by a certain date.
Just as you can buy a stock because you think the price will go up or short a stock when you think its price is going to drop, an option allows you to bet on which direction you think the price of a stock will go. Sell the contract to another investor.
Let the option contract expire and walk away without further financial obligation. But options are useful for long-term buy-and-hold investors, too. Learn the differences between options and stocks Why trade options?
Investors use options for different reasons, but the main advantages are: Buying an option requires a smaller initial outlay than buying the stock. An option buys an investor time to see how things play out.
An option protects investors from downside risk by locking in the price without the obligation to buy. You also can limit your exposure to risk on stock positions you already have.
If the share price does indeed tank, the option limits your losses, and the gains from selling help offset some of the financial hurt. That education can come in many forms, including: Online options trading courses.
One-on-one guidance online or by phone.
Face-to-face meetings with a larger broker that has branches across the country. Even better, if a broker offers a simulated version of its options trading platform, test-drive the process with a paper trading account before putting any real money on the line.
Consider what kind of contact you prefer.
Live online chat? Phone support?
Options Trading for Beginners: Strategies for Getting Started
Does the broker have a dedicated trading desk on call? What hours is it staffed? What about representatives who can answer questions about your account? Even before you apply for an account, reach out and ask some questions to see if the answers and response time are satisfactory.