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Blue Chip Kids: What Every Child (and Parent) Should Know About Money, Investing, and the Stock Market by David W. Bianchi

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CHAPTER 5 STOCK OPTIONS (IMPRESS YOUR FRIENDS WITH THIS ONE)

Don't be intimidated by this. It is really not that hard. You can buy and sell stock options just like you buy and sell stocks. They go up in value; they go down in value. Study this chapter and be the smartest kid in your class.

Options and the World of Puts and Calls

As you know, after you buy a stock its price can go up or down; you simply do not know what it will do despite how much research you may have done ahead of time or how confident you may be in your purchase.

To try to protect yourself from a big decline in the price of the stock you just bought, one thing that some investors do is buy and sell options.

There is a huge market out there where options are bought and sold every day. Just like stocks, you can follow the options market any time you want to on your home computer. Websites like Bloomberg.com, Etrade.com, and many others have options information available for you to look at any time you want to.

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Options are cool, and if you spend a little time to understand how they work, you will know more than 99.9 percent of all the kids in the world about a very popular way to protect your stock investments and make money. So here we go; let's take a look at the world of options.

Options: How They Work

Options can be complicated, but the concept of how they work is not. There are basically two kinds ...

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