Stock Market Trading
- Options give you the right to buy or sell a security.
- When you buy an option, the most you can lose is the amount you pay for the option.
- Each option corresponds to 100 shares of underlying security.
- When you buy an option, it is a cash purchase, there is no margin requirement.
- The maximum profit when you write an option is the amount of the premium received.
- An option loses its time value the fastest during the last 30 days before expiration.
- More than 80 percent of options expire worthless.
- The lower the underlying futures volatility, the lower the option premiums.
- The higher the underlying futures volatility, the higher the option premiums.
- Options are less liquid than the underlying futures.
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