Introduction to Options Trading

Posted on 2023-04-25

Options trading is a type of financial derivative that involves buying or selling a contract that gives the owner the right, but not the obligation, to buy or sell an underlying asset at a predetermined price and time. The underlying asset can be stocks, currencies, commodities, or indices.

Options trading can be used for various purposes, such as hedging against market risks, generating income from premiums, or speculating on the direction of the underlying asset's price movement.

There are two types of options: call options and put options. A call option gives the owner the right to buy the underlying asset at a specified price, while a put option gives the owner the right to sell the underlying asset at a specified price.

The price of an option contract is determined by several factors, including the current price of the underlying asset, the strike price, the time remaining until expiration, and the implied volatility of the underlying asset.

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