Larry Savage Birmingham - Acquaint Yourself With Stock Options Trading
Larry Savage Jr is a serial entrepreneur and Intelligence Analyst whose ventures include Alternative Energy (LED & Solar), Logistics, Stock Options Trading, & Marketing. He has had massive success over the years, still he kept working on his strategies to become one of the most respected businessmen in the country today. Trading options is very different from trading stocks, as options embody different characteristics from stocks. Larry Savage Birmingham suggests that investors should take time to understand the different terms used in stock option trading and the different concepts involved with it before resorting to trading.
Options are financial derivates as they derive from an underlying security or stock. They give buyers the right and not any obligation to buy or sell any underlying stock. Trading options seems to be like betting on horses on the race track. Each viewer bets against one another. So trading options just like betting at the race track is a zero-sum game wherein the option buyer’s gain is the option seller’s loss and vice-versa. Options vs Stocks Another important difference between stocks and options is that stocks give ownership while options are just contracts that give you the right to buy or sell any stock at a specific price and time. Remember that there are always two sides of every transaction: a buyer and a seller which implies that for every purchase of an option there’s always someone else selling it.
Types of Options There are two types of options… calls and puts. When you buy a call option the right remains with you to buy a stock at a set price which is popularly known as a strike price. When you buy a put option then you have to sell that particular stock at the strike price before the option expires. When individuals sell options they create a security that didn’t exist before which is known as writing an option and it becomes one of the main source of options. While writing a call, you might have to sell shares at the strike price before the expiration date. When you write a put then you may be obligated to buy shares at the strike price before it expires.
The price of an option is known as a premium. Larry Savage Jr. loves the fact that the buyer of an option loss will not exceed more than the initial premium paid for the contract. This allows for the buyer’s risk to not exceed the amount paid for the option, resulting in the potential for profit to be theoretically unlimited.
Source Credit: https://medium.com/@larrysavagejr/larry-savage-bi rmingham-acquaint-yourself-with-stock-options-tra ding-7bf03424a31c
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