Course: Options and Strategies
Lesson Insights
Stock options are financial contracts between a buyer and a seller that give the buyer the right, but not the obligation, to buy or sell a specific stock at a specific price (strike price) on or before a specific date (expiration date). They are considered a type of derivative because their value is derived from an underlying asset, which is the stock.
The history of stock options dates back to the 1600s in Amsterdam, where they were used as a form of investment. However, it wasn't until the early 1970s that stock options became widely available and began to be traded on exchanges.
Examples of stock options from everyday life can include employees who receive stock options as a form of compensation from their employer. For example, an employee may be granted the option to buy a certain number of shares of the company's stock at a set price. If the stock's price rises above the strike price, the employee can exercise the option and make a profit. Another example could be an investor who uses stock options to hedge against potential losses in their stock portfolio. By buying a put option, the investor can lock in a selling price for their stock, reducing their potential loss in the event of a downturn in the market.
Trading with options is basically the “game” of risk and probabilities. This lesson introduces this correlation through a playful example.
Additional content, strategies, stories, analyses, and tables for this lesson:
"Options and Strategies"
+ for all the other lessons as well!
Strategies - Stories - Tables
Get access for more than 65 strategies, 34 tables and all the extra contents!
Only $19 / month
Activate SHORTS 5Additional content for this lesson:
Demystify the world of trading with our Trading Terminology Shorts category. We bring you concise definitions and relatable analogies to help you understand the ins and outs of stock market trading, making your educational journey even more enjoyable and rewarding.
Discover the titans of finance who've shaped the world of stock exchanges and digital currencies. Dive into the lives and legacies of these financial luminaries and learn about their contributions to the ever-evolving landscape of modern investment.
Delve into the riveting Trading Tales Shorts category, that have defined the course of market history. Learn from the successes, failures, and surprising twists in these stories, and apply the lessons learned to your own trading journey. Ignite your curiosity and expand your knowledge with our captivating collection of stories.
Dive deep into the world of trading and finance with our comprehensive essay collection, covering a wide range of topics in detail. Explore in-depth analyses of financial phenomena and gain a richer understanding of the mechanisms that drive markets and investment strategies.
Discover the power of structured learning in our Structured Overview Shorts category, where we break down complex stock market concepts, examples, and calculations into an accessible and easy-to-follow format. Master the intricacies of finance and trading as you learn at your own pace with our organized and methodical content.
Build your financial library with our Reading Corner Shorts category, offering expert recommendations on the best books covering various stock market topics. Learn from the masters and elevate your trading skills with these must-read titles.
Elevate your trading experience with our Tech Toolkit category, featuring top software solutions for every aspect of investing. From trading platforms to analytical tools, find the perfect digital companion to streamline your stock market journey and maximize your returns.
Gain a well-rounded understanding of trading techniques and tools with our "Pros & Cons" category. Discover the strengths and weaknesses of various market strategies, indicators, and software to make educated decisions in your trading journey.
Expand your knowledge with our Contrast Corner Shorts category, showcasing in-depth comparisons between different stock market terms, methods, and tools. Uncover the critical differences that can help you build a more robust trading strategy and stay ahead in the dynamic world of investing.
