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Options are mostly misunderstood but are a very important tool that the average investor could use to enhance their returns. Basically, options are a negotiable instrument, can be traded, that give the buyer the right, but not the obligation, to buy(call) or sell(put) the underlying stock (or futures contract) at a specified price until their expiration. In other words, options are tradable insurance contracts. An investor can purchase an option as insurance against decline in the stock or a rise in the stock. There are many ways to trade options, some are very complicated, but only the basic methods are outlined here. |
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