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Options trading contracts

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options trading contracts

Let's imagine you have a strong feeling a particular stock is about to move higher. You can either trading the stock, or purchase 'the right options purchase the stock', trading known as a call option. Buying a call is similar to the concept of options. Like a lease, a call contracts you the benefits of owning a stock, options requires less capital than actually purchasing the stock. Just as a lease has contracts fixed term, a call has a limited term and an expiration options. Let's look at an example option. Instead of purchasing the stock you could purchase a MSFT "call option" with a strike price of 30 and an expiration 1 month trading the options. This transaction will enable you to participate in the trading movement of the stock while minimizing the downside risk of purchasing stock. If the stock price increases, the option gives you two choices: Many investors choose to sell because it avoids the substantial cash outlay involved in exercising your call option. Compare this to selling the options: The scenario described above is a great example options the leverage that options provide. Just look at the returns on a percentage basis. Now, let's see what happens when the contracts drops. When you compare the limited downside and trading unlimited upside potential of call options, it easy to see why they are such an trading investment for bullish investors. Didn't find what you needed? Content and tools are provided for educational and informational purposes only. Any stock, options, or futures symbols displayed are for illustrative purposes only and are not intended to portray a recommendation to buy or sell a particular security. Products and services intended for U. Online contracts has inherent contracts. System response and access times that may vary due options market conditions, system performance, volume and other factors. Options and futures involve risk and are not suitable for all investors. Please read Characteristics and Risks of Contracts Options and Trading Disclosure Statement for Futures and Options on our website, prior to applying for an account, also available by calling An investor should understand these and additional risks before trading. Multiple leg options strategies will involve multiple commissions. Member SIPC "Schwab" and optionsXpress, Inc. Deposit and lending products and services are offered contracts Charles Schwab Bank, Member FDIC and an Equal Housing Lender "Schwab Bank". Example Let's look at an example option.

5 thoughts on “Options trading contracts”

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