Options Trading – 5 Interesting Facts About Stock Options

When people refer to options trading they could actually be referring to a number of different securities. Options are traded on all types of securities (forex, commodities, stocks, etc.), but for the purpose of this article I will only be referring to stock options.

Here are 5 interesting facts about options trading that most traders never realize:

Fact 1: Most people never know who actually creates stock options. Heck, I traded for years before I found out the Options Clearing Corporation (OCC) issues all listed options at the CBOE as well as other US option changes.

The OCC ensures the options market places liquid and that there is always a buyer and seller for every transaction. Another party that helps facilitate this liquidity are Market Makers.

Fact 2: Sometimes it's not another options trader who buys or sells your stock option from / to you. Market Makers are exchange members who help keep the market liquid by using their own money to buy and sell options.

So when there is an absence of public buy and sell orders the Market Makers step in and put up their own capital to ensure the trade can be executed.

Fact 3: The price options are quoted at is their per share price, but they are only actually sold in 100 share batches. So what that means is that whatever price you see quoted has to be multiplied by 100 to get the true cost of that option.

People who are unaware of how stock options work may look at a quoted price of $ 2 and then get excited thinking they can buy that stock option for $ 2 when in all actuality it will cost them $ 200.

Fact 4: Stock options do NOT expire the third Friday of the month of their expiration. They actually expire the third Saturday of the month of expiration, but for trading purposes people typically state that they expire on Friday (since the market is not open on Saturday).

Fact 5: When you purchase a stock option you're not purchasing ownership in anything like you are with stocks. The only thing you are purchasing is a contract that grants you certain "rights".

In the case of a Call option you are purchasing the "right" to buy a stock and with Put options you are purchasing the "right" to sell a stock.

Options trading can be confusing at first, but take your time, keep learning and eventually things will start to come together.



Source by Travis W

Technical Indicators

Learning the tips, tricks and basically how the foreign exchange market works is the key to success in becoming a trader. There are things that an aspiring should learn before starting to trade through the internet. From the basic points and fundamentals of trading in the Foreign Exchange to the numerous lessons to tackle, each one is important to equip the person with the proper mindset for trading forex.

These lessons would also serve as the trader's tricks up his or her sleeve. They would assist the trader in deciding what move to do next and at the same time, help them understand what the market movement means. One very useful tool that one can learn from forex education is known as technical indicators.

There are actually different kinds of technical indicator today, but there is a way to categorize them. First is known as the oscillator and the other is known as momentum follows. The first category deals with technical indicators which show the trader where a trend is about to start. Being able to be one amongst the first in a trend is the most profitable position but the risks are great as these oscillator signals can be misleading.

The other currency exchange signal category known as momentum follows. It is names as such because these signals appear where a trend has begun and is already climbing. This lessens the risk of falling for a misleading trend but the money the trader will earn from this is far less compared to the first one.



Source by Timothy Stevens