What is the trading of options?
The possibility, sometimes called a derivative, is an agreement between the buyer and the seller for the sale of assets at an agreed and fixed price, on a certain date of the future date. The asset is usually a financial type - shares or value of futures. As the name suggests, the agreement is optional - the buyer is not obliged to buy an asset, whether it decreases or increases value. However, the seller is obliged to make a transaction if the buyer decides. Suppose a buyer who wants to make an offer in a cash house will not have the necessary cash for the next six months. He could negotiate an agreement with the seller, where he buys the house in six months at additional costs of 1% of the selling price. In addition, the buyer pays for the comfort of buying the house when it suits it.
There are two types of options - call and option options. The call option gives the buyer the right to purchase an asset, at previously agreed prices and on the specified date. Put gives the buyer the right to buy an asset and then sell it immediately to a third party. InThe United States, but not in Europe, can also be applied before the specified date, if the buyer and the seller agree.
Like most financial transactions, trading in options has its advantages and disadvantages. One disadvantage is for the buyer that the investor can eventually pay a fee for a possibility for which he is never performed. This means that a potential buyer can now pay a fee for the possibility to buy in the future. Since the buyer does not have to complete the transaction in the future, if the buyer decides not to complete the transaction, he will lose the fee that has ensured the possibility to buy. Option trading generally benefits the buyer, rather than a seller who is also known as the writer of this possibility. In addition, some stores require an intermediary or broker who also charges a fee.
On the other hand, trading with options is advantageous in that it is flexible and offers the opportunity to download the offer. Buyers can also hold their money for longertime, which allows this money to earn interest. The possibility can also act as a form of insurance to ensure that the buyer is profitable if he buys shares or asset, which is somewhat risky.