Before you ever even consider becoming actively involved in the options trading system, it is vital that you get an options trading education. Part of this education involves understanding the basics, such as what an option is. For those who aren’t quite in the know yet, an option is a contract that gives you, the holder, the right to buy or sell a specific amount of stock. Sometimes this may be another type of security all together. Nevertheless, you’ll have the right to sell it at a specified price through the option trading system. The price is oftentimes referred to as the strike price. You’ll have the right to do this until the date the option expires. However, as the holder, you aren’t obligated to actually exercise this option and sell your stock.
Thanks to a lot of options trading newsletters, options trading has received the reputation of being a speculative and very risky form of securities trading. While there is a lot of speculative and high risk involved here, there are also ways in which you can limit the risk. These are all things you’ll need to learn before you get involved with this business.