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Trading Options For Dummies, 2nd Edition by Joe Duarte

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Chapter 2

Introducing Options

In This Chapter

arrow Making sense of an option contract

arrow Discovering an option’s value

arrow Getting reliable option data

arrow Starting out in options trading

There are many forms of options, but this book spends most of its time on listed stock options and listed index options, both of which trade on exchanges. These two distinct types of options function in two ways. First, they can be used to manage your risk by limiting your losses. And they offer you the opportunity for profits when used with the right strategy.

As silly as it may sound, to make the most out of options trading, it’s imperative that you really understand what options are and know the risks and potential rewards associated with them. That’s why this chapter details the information on the individual components of an option and how to recognize them in the market.

Understanding Option Contracts

By learning the basics of options contracts and then being able to compare them to other derivatives, you will be able to get a good working understanding of these securities and how to best use ...

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