Options Trading
Learn How to Trade in Options with technical analysis in a Successful and Profitable Way
Options are contracts that give the bearer the right-but not the obligation-to either buy or sell an amount of some underlying asset at a predetermined price at or before the contract expires. Like most other asset classes, options can be purchased with brokerage investment accounts.
Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.
In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option that profits from that event would be. For instance, a call value goes up as the stock (underlying) goes up. This is the key to understanding the relative value of options.
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