SPY (S&P 500 Index Tracking Stock) - SPDRs - Spider - Options Trading and uncovered options

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Information Corner:

Why Trade Index Options - Less uncertainty: The key reason we trade index options rather than options on individual stocks is that price and volume fluctuations are much higher for a particular stock than they are for an index. Stocks often react wildly to unpredictable events, such as news, rumors...

Expiration Date - At the end of the expiration date, all those call options whose strike prices are higher than the price of the underlying stock or index will be worthless...

Start To Trade - Placing an options order is very similar to placing an order for a stock. If you use a live broker, call your brokerage firm and tell them which option you want to buy...

Start to Trade

Description: Options, brokerage. options trading, margin requirements, trade, qqq, spy, options trading, stock

Placing an order for a stock is very similar to placing an options order. Call your brokerage firm and tell them which option you want to buy, if you use a live broker. Name the options symbol, the strike price, and provide the expiration date. Specify the number of contracts you would like to purchase, next. Decide on neither a specific price you are wiling to pay for the option (i.e., use a "limit order") or place your order "at market" (i.e., a "market order"), which means you will receive the best available price at the specific moment your order hits the trading floor, finally.

You will have to meet certain funding requirements before the brokers will accept your options order, with most brokers. You must have the necessary funds to cover any margin requirements, for example. Your broker will require you to open a margin account, to trade options. You will still be asked to trade on margin for example, even if you are not going to borrow money from your broker.

  • The amount of money you must have in your account at the time you place an order, is the "Initial Margin Requirement". The funds must therefore be deposited into your account before any orders can be accepted;
  • The "Maintenance Margin" is calculated as a minimum margin per outstanding contract; you must maintain that amount in your account in order to be able to hold an options position.

Your broker will send you several agreements, after you have met these margin requirements, among them the documents entitled "Characteristics and Risk of Standardized Options" and "Understanding Stock Options". If you have only just started to trade options, these texts are very useful.

You may place an order with your broker, after you have opened an account and met the margin requirements discussed above.

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...