Stock options are a great way to leverage investment capital for speculation and to reduce the risk for existing stock positions in your portfolio or even to earn an extra riskless income.
There are so many option strategies that whole books were written about this topic. Before you can think about mastering advanced option techniques, you must start exploring the basic option strategies first, the simple call and put option.
What is a stock option, exactly? If you have never traded options before it might a bit overwhelming in the beginning. The theory is much harder than the praxis. Buying a call option is almost the same as buying the stock itself. Just that you need much less money, just about 10% what would be needed to buy the shares.
An option is counted in contracts and not in shares. If you buy one option contract then it equals 100 shares of stocks. Let’s say you want to buy 1000 shares of Intel, then you either can buy the shares at the stock exchange or you buy ten Intel contracts at the option exchange with just 10% of the money. The leverage is the same as you would own 1000 shares.
The option gives you the right to buy 1000...
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