Options
Options are contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a specific date. They are used by traders to speculate on market movements or hedge against potential losses. Options require less capital, but also involve greater risk and reward.
Options: Main Points
Learn More about Options
Think of options like a special deal you might make when buying or selling something, but for stocks or other valuable things. Imagine you're given the choice to buy or sell something at a fixed price within a certain time. You're not forced to do it, but you have the option.
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For instance, if you have a "call" option, it's like having the right to buy something (let's say a stock) at a certain price in the future, no matter if the actual price goes up or down. On the other hand, a "put" option lets you sell something at a set price, even if the real price goes down.
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People use these options to make money in the stock market. If they think the price of something will go up, they might buy a call option, and if they think it'll go down, they might buy a put option. These options have prices too, called "premiums," which change based on things like how much time is left before they expire and how much the real thing's price might change.
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However, trading options can be tricky, and there's a risk you might lose money if things don't go as expected. So, while options can be helpful, they need a good understanding and careful thinking before you use them.