What Is Stock Options Trading?

What is trading stock options, exactly? When you purchase a stock, you own a tiny sliver of that company, even if just for a few hours. Options allow you to buy or sell a stock at a pre-determined price on a specific date. It’s a contract giving you the option to buy or sell – you are under no obligation to complete the purchase. With options trading, you can profit in both bull and bear markets.

Option trading always involves a buyer and seller, and a call or a put. Purchase a call option, and you can buy the stock at a specified price – the strike price – until the option expires. A put option is the opposite – the right to sell the stock at a specified date until the option expires. In reality, these securities seldom actually expire. Selling is also known as writing the option. Option buyers take long positions, while sellers take short ones. You can never lose more with an option than the price paid for it. However, you can potentially make a great deal of money.

How Is Stock Options Good For Traders?

If you’ve heard about stock options trading but aren’t sure exactly how to proceed, SureTrader can help. Options trading involve determining whether a particular stock’s price will rise or fall, just as with day trading. However, unlike day trading, stock options trading is a zero-sum endeavor, with one party’s gain the same as another’s loss. The actual companies whose stocks underlie the trade have nothing to do with the options. As with any kind of day trading, there’s a lot of terminology to acquaint yourself with, and a learning curve as you develop a strategy.

Option Terms

  • Options Terms: A call or a put, an option is a contract that entitles the buyer to buy (in the case of a call) or sell (in the case of a put) a number of shares of stock at a predetermined price on or before a fixed expiration date. Strike Price: The pre-determined price at which underlying stock is purchased (in the case of a call) or sold (in the case of a put) when an option is exercised.
  • Buy to open: Used to open a long option position, be it a call or a put.
  • Sell to close: Used to close a long option position, be it a call or a put.
  • Sell to open: Used to open a short or naked option position, be it a call, put, or a covered call.
  • Buy to close: Used to close a short or naked option position, be it a call, put, or a covered call.

Using Stock Options to Leverage and Increase Your Holdings

Leverage is the way large profits are made in stock options trading. You’re employing a small amount of your capital for the possibility of a big payoff. On the other hand, the potential loss is also higher. That’s why doing your research and developing the right trading strategy is essential. SureTrader offers 6:1 leverage for intraday trading and 2:1 leverage for overnight trading. Our low account minimums mean you can use leverage to increase your holdings from the start.

Understanding Stock Trends

Options Trading

What Is Stock Options Trading?

What is trading stock options, exactly? When you purchase a stock, you own a tiny sliver of that company, even if just for a few hours. Options allow you to buy or sell a stock at a pre-determined price on a specific date. It’s a contract giving you the option to buy or sell – you are under no obligation to complete the purchase. With options trading, you can profit in both bull and bear markets.

Option trading always involves a buyer and seller, and a call or a put. Purchase a call option, and you can buy the stock at a specified price – the strike price – until the option expires. A put option is the opposite – the right to sell the stock at a specified date until the option expires. In reality, these securities seldom actually expire. Selling is also known as writing the option. Option buyers take long positions, while sellers take short ones. You can never lose more with an option than the price paid for it. However, you can potentially make a great deal of money.

How Is Stock Options Good For Traders?

If you’ve heard about stock options trading but aren’t sure exactly how to proceed, SureTrader can help. Options trading involve determining whether a particular stock’s price will rise or fall, just as with day trading. However, unlike day trading, stock options trading is a zero-sum endeavor, with one party’s gain the same as another’s loss. The actual companies whose stocks underlie the trade have nothing to do with the options. As with any kind of day trading, there’s a lot of terminology to acquaint yourself with, and a learning curve as you develop a strategy.

Option Terms

  • Options Terms: A call or a put, an option is a contract that entitles the buyer to buy (in the case of a call) or sell (in the case of a put) a number of shares of stock at a predetermined price on or before a fixed expiration date. Strike Price: The pre-determined price at which underlying stock is purchased (in the case of a call) or sold (in the case of a put) when an option is exercised.
  • Buy to open: Used to open a long option position, be it a call or a put.
  • Sell to close: Used to close a long option position, be it a call or a put.
  • Sell to open: Used to open a short or naked option position, be it a call, put, or a covered call.
  • Buy to close: Used to close a short or naked option position, be it a call, put, or a covered call.

Using Stock Options to Leverage and Increase Your Holdings

Leverage is the way large profits are made in stock options trading. You’re employing a small amount of your capital for the possibility of a big payoff. On the other hand, the potential loss is also higher. That’s why doing your research and developing the right trading strategy is essential. SureTrader offers 6:1 leverage for intraday trading and 2:1 leverage for overnight trading. Our low account minimums mean you can use leverage to increase your holdings from the start.

SureTrader gives you Day Trading Options

If you want to learn how to do stock options trading with SureTrader, we offer one of the best platforms on the web on which to conduct your trades. At SureTrader, we make day trading options as accessible and affordable as possible. Along with low commissions, clients receive various tools necessary for successful day trading, including research, charting and up-to-the-second market data.

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Risk Disclosure

Prior to buying or selling an option, investors must read a copy of the Characteristics & Risks of Standardized Options, also known as the options disclosure document (ODD). It explains the characteristics and risks of exchange traded options: https://www.cboe.com/resources/intro.aspx

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