Options trading is one of many ways to make money work for you. With small starting capital and within a short period of time profit can be made with fixed risk but substantially higher gaining ratio, when everything properly built.
An option is a contract that devotes the owner the right, but not the responsibility, to buy or sell a security at a detail price on or before a certain date.
Option markets are similar to futures markets. They give the holder the right to buy or sell the fundamental security for a sure price on a specific date in the future (known as the expiration or exercise date). But options have some big difference from futures.
Investors buy and sell options just like stocks. There are two basic types of options:
The call option
The call option is the right to buy the fundamental security at a sure price on or before a certain date.
You would buy a call option if you expected the price of the fundamental security was going to go up before the option passed expiration
The put option
The put option is the right to sell the fundamental security at a sure price on or before a certain date.
You would buy a put option if you sensed the price of a stock was falling before the option passed expiration.
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