Many people think that options are risky, but we can actually reduce the risk if we invest properly. In this video, I’ll go through the basics of options and how do they work, enjoy!
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0:00 – Intro
0:28 – What are options?
A stock option gives an investor the right, but not the obligation to buy or sell a stock at an agreed upon price and date. With an option, the investor can use it to buy or sell a stock anytime before the expiry date. He don’t have the obligation to use it, but of course, if he doesn’t use it, the option will expire worthless.
2:33 – Examples
3:41 – Special property of options
When buying options, you have to buy in 1 lot, of 100s. Then when using it, you would have to buy or sell 100 stocks.
Options is a contract between 2 investors. You can pay money to buy a call option to have the right to buy a stock at a certain price. Or you can sell a call option, to give the right to someone else to buy the stock from you at a certain price.
Options are worthless are expiry. It’s value will decline quicker the nearer to expiration date. That’s why it is very risky by just buying an option. However there are lots of strategies to reduce the risk.