What are stocks?

In its simplest form, shares are a contractual contract between two parties that will expire in the agreed time in the future. The buyer buys the right, but not the obligation, to buy (the "call") or sell ("put" option) the asset ("background") at a particular price, on the date agreed or earlier. The contract of contracts accepts the obligation to accept the other side of the transaction. Thales of Miletus speculated that the year of the annual olive harvest would be particularly abundant, and gave a deposit for every olive press in its Greece region. The harvest was enormous, the demand for olive presses increased sharply, and Thales sold its rights or possibilities to the presses during considerable profit. The modern history of stock options trading begins with the establishment of the Chicago Board Options Exchange (CBE) from 1973 and the development of the Black-Scholes Awards. The expiration date determines when the option contract becomes zero and invalid. The basis is an asset on which it is based on stocks. Strike price or price of exerciseIt is the price at which the underlying asset will be purchased or sold if the option holder decides to exercise his right to purchase or sell. Stock options in the European style are only applied to the expiry date; The US -style stock options are performed at any time before the expiry date.

atm or money is the one where the strike is about the same as the current basic price. OTM, or the possibility of money, is one where the basic price is far enough from the strike price, that there is no motivation to apply the contract. Conversely, ITM, or the possibility of money, is where the holder can use this option.

The simplest strategy of trading options for stocks is to buy the possibility of calling an OTM (or give) if the expectation is for a dramatic increase (or reducing) the price of the background. Spreads include buying one option and selling another; Are often usedto reduce the initial costs of the position at the expense of lower maximum potential profits. Examples of spreads are verticals, re -evaluation, bull and bear spread, ratio of ratio, butterflies and condors.

stock options allow speculators to bet on market movement without having to choose direction up or down. For example, buying an ATM and calling an ATM would be exposed to a dramatic move in both directions. For this reason, shares traders are often said to trade rather than price.