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Options
Basics
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With options you are given the right,
not the obligation, to buy or sell a security, at a specific price,
for a predetermined period of time.
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Your maximum potential loss is limited
to the amount you paid (i.e., the premium) when you buy an option.
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Each option contract corresponds to 100
shares of an underlying security.
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No margin is involved; when buying
options is a cash transaction.
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Your maximum potential profit is the
amount of the premium you may receive, when you sell (write) an
option.
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As options approach expiration they lose
time value. During the last 30 days of it’s life, an option loses
its time value the fastest.
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Options are less liquid than the
underlying security.
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Information Corner:
Market Timing - We trade options based on market timing principles.
This means we analyze past trends in options volume and options cash
volume in order to generate an accurate forecast of the probable future
market trends...
Options Basics - Purchasing an
option gives the buyer the right, but not the obligation, to buy or sell a
specific amount of an underlying security at a specific price within a specified
time period...
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