Building a Stock Portfolio – Stock Options
Making money in the stock market essentially involves buying and selling stock, shares, or options on the stock market.
Building A stock Portfolio: Stock Options
Stock options represent contracts that grant the owner the right, without obligation, to buy or sell the main agreement at a certain price on or before a certain date.
Trading options can add to building a stock portfolio. So, what can you do with stock options?
- You can buy or sell the underlying security.
- You can trade your options.
- You can use the options to hedge against a loss.
Building A Stock Portfolio And Exercising The Option
If you believe that a certain stock is going to rise, however you don’t want to take the chance that it won’t rise, you can buy a call option around the current market price. If the stock climbs higher before the option expires, you then have the option to buy the stock at that lowered price. Then you could either hold onto that stock or sell it and profit it from it, minus the cost of option, commissions, and taxes.
Trading The Option
Many investors trade options without ever having an intention to possess the underlying security.The price of the underlying security affects the price of option moving it up or down. And as time expires, the option becomes less desirable, the amount of time left affects the price.
Building a stock portfolio may sound intimidating for beginners, but there is always room for success. Get yourself some good books, research sites, or online courses and you’ll be well on your way toward a good stock investing experience.