Ordinary Options For anyone who needs a refresher, options are...

  1. 1,118 Posts.
    Ordinary Options
    For anyone who needs a refresher, options are contracts that give the right, but not the obligation, to buy or sell an underlying assets at a specified price (called strike price). A trader gains from either 1) the difference in strike or 2) the appreciation of the contract price in the market.

    The maximum loss one could lose is the price of the option. The maximum gain is theoretically unlimited. Of course, in practice, gains are limited by the following
    1) The date of the options contract expires (which is when the contract is either excised or worth nothing)
    2) Limitations of the underlying asset.

    Some things I don't like about ordinary options are:
    * If I plan to have the option to carry across the next day, 1 contract can cost me anything from $1000. Earnings are based on how many contracts you have. That's a big investment for $10 per point.
    * Entering into a stock is already $100 (insert destination currency here) out of pocket - quite a big spread to make up. It's like paying $50 brokerage per direction.
 
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