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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:
Investing in Options - Before you begin investing in options, you must decide
how much of your money you can safely put at risk. If you are new to
options, we recommend no more than 10% of your portfolio...
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