Real Time Stock Options Trading

A stock option is an investment privilege bought and sold by investors that gives the holder of the option the ability to buy or sell a particular stock at a previously set price as long as it is within the specified time frame. It is important not to confuse an option with a substitute for a stock. Some investors look at options like an alternative to stocks with less capital required and more leverage. There is always risk when making an investment, which is why you should deal with an investment professional or do plenty of research on information and terminology related to stock options before trying your hand at these types of investments. There are online brokerage firms that offer real time stock options trading but without proper knowledge or guidance you could be risking your money.

Calls and puts are the two kinds of stock options. The purchase of a call option gives you the right to buy a particular stock at the strike price at any period before option expiration. The purchase of a put option is the opposite, you can sell the stock at the strike price before the option expiration, but once again you do not have to sell it. Options are simply contracts that allow you to sell or buy stocks at designated prices by certain dates. Stocks actually give you a small portion of company ownership. Basically, options are not stocks, they are rights to take certain actions with stocks.

The cost of an option is referred to as a premium. The investor who buys the option can’t lose more money than the contract premium. This means the buyer takes a risk no greater than the cost of the option. On the other hand, they can make a profit that is much higher than the premium if things go favorably. The seller, in exchange for the price paid for the option, must take the risk of delivering on a call or taking a put on shares of the buyer exercises their right. The seller can lose more than the amount they received as the premium.

Another thing you should know is that there are both American and European options. American options can be traded between the time of purchase and the date of expiration. European options can only be traded on the date of expiration. The majority of options traded on the exchange are American, while most European options are index traded. Whether or not to go for American or European options is a decision best made by a knowledgeable trader or investment professional.

You can learn more about real time stock options trading from brokerage firms online, there are plenty of them out there. Basically you are being your own stockbroker right from your computer, buying and selling for a certain fee. If you feel you are not prepared to take this kind of risk with your money, look around for a respected investment professional who can handle the trading for you based on the amount of money you have, your financial goals and how much risk you are willing to assume.

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