Options Trading

The Basics of Stock Options Trading

Stock options trading provides a way for investors to profit from the future price of a stock. The owner of a stock option has acquired a right (but not an obligation) to buy or sell a stock at a pre-determined price on or before the date that the options contract has been set to [...]

The Risk of Selling Naked (Uncovered) Put Options

A naked put, also known as an “uncovered put” refers to the selling of a put option without having a short position in the stock for which the put was written. A put option gives the owner of that option the right (but not the obligation) to sell a predetermined amount of the underlying [...]

Backspread Strategies in Stock Options Trading

A backspread is an options spread strategy under which the trader holds a greater number of long positions than short positions. Using a backspread strategy, the trader will use the premium they receive from selling short positions to fund the purchase of long options. A backspread can be created using either call or [...]

Stock Options Trading with a Ratio Spread

A ratio spread is an options trading strategy under which the trader buys a number of options and sells a greater number of options of the same underlying stock and expiration date in an effort to capture profit through a small uptick in the price of the underlying stock. For example, the trader might [...]

Risks and Rewards of a Long Put Strategy

A Long Put is an options strategy used by investors looking to profit from a downward price move in an underlying security or an index. Under this strategy, the investor purchases a put option on the open market and then hopes for a price decrease of that security or index. For many investors, [...]

Open Interest and Options Trading

Open interest refers to the total number of outstanding contracts held by investors at the end of a trading day. The open interest measure (which can also be defined as the total number of open contracts on a given security that have not yet expired, been exercised or delivered) is used to monitor the [...]

What Are Stock Options?

Stock options are securities that offer investors a way to “bet” on the future price direction of a stock. Stock options provide the contract purchaser the right to buy or sell an asset a stock at a set price, on or before the expiration date of the contract. The contract seller agrees to [...]