Introduction to Options-[Learn - Call and Put Options] (Lesson 1)
Introduction to Options will walk you through call and put options and through the basic use of a call. You will learn how to compare buying a stock to buying a call option. And we also advance to a call spread to illustrate how to better manage risk.
What is an Option?
There are two types of options.
Call options allow investors to position for upward movement in underlying share prices. Put options allow investors to position for downwards movement in share prices.
An option is a contract that allows an investor to control 100 shares in a company.
An option contract has an expiration date and a strike price. The price a trader pays for an option is called a premium.
The call option offers upside exposure in the event the share price rises. However, by selling the call the investor reduces the maximum possible loss.
Vertical Spread
A vertical spread offers limited potential profit, as well as limited loss potential. The strategy involves the purchase and sale of the same type of option, but with different strike prices.
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Options involve risk and are not suitable for all investors. For more information read the Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD). To receive a copy of the ODD call 312-542-6901 or copy and paste this link into your browser:
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