Calvin K. North - Options Trading: The Basics of Options Trading for Beginners and the Best Simplified Strategies to Make Money

Options Trading

The Basics of Options Trading for Beginners and the Best Simplified Strategies to Make Money

Copyright 2018 by Calvin K. North - All rights reserved.

The follow eBook is reproduced below with the goal of providing information that is as accurate and reliable as possible. Regardless, purchasing this eBook can be seen as consent to the fact that both the publisher and the author of this book are in no way experts on the topics discussed within and that any recommendations or suggestions that are made herein are for entertainment purposes only. Professionals should be consulted as needed prior to undertaking any of the action endorsed herein.

This declaration is deemed fair and valid by both the American Bar Association and the Committee of Publishers Association and is legally binding throughout the United States.

Furthermore, the transmission, duplication or reproduction of any of the following work including specific information will be considered an illegal act irrespective of if it is done electronically or in print. This extends to creating a secondary or tertiary copy of the work or a recorded copy and is only allowed with express written consent from the Publisher. All additional right reserved.

The information in the following pages is broadly considered to be a truthful and accurate account of facts and as such any inattention, use or misuse of the information in question by the reader will render any resulting actions solely under their purview. There are no scenarios in which the publisher or the original author of this work can be in any fashion deemed liable for any hardship or damages that may befall them after undertaking information described herein.

Additionally, the information in the following pages is intended only for informational purposes and should thus be thought of as universal. As befitting its nature, it is presented without assurance regarding its prolonged validity or interim quality. Trademarks that are mentioned are done without written consent and can in no way be considered an endorsement from the trademark holder.

Introduction

C ongratulations on downloading this book and thank you for doing so.

The following chapters will discuss everything that you need to know in order to get started with options trading. Options are a bit different compared to other forms of investments. They allow the investor the right, but not the obligation, to purchase an asset at a later time. If things go well, the investor is able to purchase that asset, usually at a discounted price, and they can then make money from this purchase. If things go poorly, the investor does not have to purchase the asset, but they will lose their initial deposit. This guidebook will go more in-depth about options and how you can get started on them while making money in the process.

In this guidebook, we will not only discuss some of the basics of options trading, but also why options are a good investment choice, how to get started with trading options, some successful trading strategies you can use, common mistakes that many traders will make, and some of the steps that you can take to reduce your risks with options trading.

When you are ready to expand out your portfolio, or at least get started with investing in the first place, then make sure to read through this guidebook to help you get started in options trading.

There are plenty of books on this subject on the market, thanks again for choosing this one! Every effort was made to ensure it is full of as much useful information as possible, please enjoy!

Chapter 1: The Basics of Options Trading

W hen it comes to finding a good investment opportunity, one that will not cost you a lot of money to get started with but can make a large profit, then it is time to take a look at investments. There are many parts that come with options trading and you need to do your research ahead of time, although anyone can join this market and make a profit. Lets take a closer look at these options and how you can get started making money in no time.

What are options?

The first thing that we need to look at is what options are. For an experienced investor, you will be able to see that they have a lot of different types of investments in their portfolio. They dont just work with stocks or their retirement account. Instead, they may have real estate, business investments, stocks, bonds, mutual funds, and more. Some of these portfolios are also going to include options, but this is not as common as some of the other choices.

An option is a contract that will give you the authority, but not the obligation, to purchase or sell an asset or security in the future. You may do this in order to get the asset at a discount later on if things are about to change. For example, a land developer may choose to enter an option with a landowner to purchase some plots within the next few years. The land developer may do this because the city is about to pass a few new regulations that would allow the value of land to go up. If these are passed, the land developer would be able to purchase the land at the agreed price, regardless of how much the market value of that land went up.

However, if the regulations do not go through, the land developer does not need to purchase the land. They will lose their initial deposit, but they wont have to purchase the land that they likely dont want now.

With options, you will pay a certain cost and this will last for a certain amount of time. Some options will last for a few months and others may last for a few years. You will know the length of the option before you enter into the agreement and you can exercise the right to purchase at any time during that period. So, if the option is for two years, you could decide to purchase at a year if you would like.

The call and put options

As an investor, there are two main things that you can do with your investment including a call and a put option. The call option is often going to be used similar to a deposit for doing something in the future. Lets go back to the example of the land developer. You may want the option to purchase a lot later on in the future, but you only want to use this right if the city passes certain laws. To do this, the developer would purchase their call option from the landowner. The landowner and developer would put in the price that the developer will pay for the land if they exercise their rights in the next three years, and then the developer will need to put down a deposit.

This deposit is to help provide an incentive to the landowner to agree to the option. If the market price goes up in the next three years, why would the owner want to take on option rather than put the land up for sale and taking the best price? The developer will offer them a deposit of the call option. If the developer decides to purchase the land, then the deposit will go towards the amount that they owe. If the developer decides to not purchase the land, then the owner would get to keep the deposit. Either way, the landowner would get something for agreeing to the option.