Puts and Calls
The most basic option strategies involve put and call strategies (buying calls or
puts), depending on your market view.
Calls - A call is the right, but not the obligation, to purchase an
asset at a specific price (the strike price), on or before
a specific date (the expiration date).
When you are very bullish on the market, you can buy calls
to profit from an upward movement that occurs while you own
the option.
Puts - A put is the right, but not the obligation, to sell an
asset at a specific price (the strike price), on or before
a specific date (the expiration date).
When you are very bearish on the market, you can buy puts
to profit from a downward movement that occurs while you
own the option. Additionally, puts can be used to balance
risk. If you are somewhat uncertain about the market, but
you feel there is a possibility for a strong downturn, you
can purchase a mixture of calls and puts to provide
balance. Buy puts on overpriced options or options on
overpriced assets. Buy calls on underpriced options or
options on underpriced assets.
When you are analyzing options to maximize your profits,
it is very important to calculate fair
value for the option you are considering, so that you know
how much over fair value you are paying for the option and
determine how much risk you are really taking on.
Then it is especially important to have a good options
analysis program like Option-Aid.
Buy Option-Aid today and increase your trading profits.
It can determine fair value for the options you are looking
at and calculate the probability of you making a profit or
taking a loss. If you pay too much for an option, the
underlying asset could move in the direction you predicted,
yet you might find your profits disappear as volatilities
moderate and option premiums return to more normal values.
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Related financial Sites:
Valuation of Company Options
Option Posting Service for Companies
Valuation of Employee Options
Forex Trading Resources
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