Call option trading tips
A call option is an agreement that gives an investor the right, but not the obligation, to buy a stock, bond, commodity or other instrument at a option price within a specific time period.
It may help you to remember that a call option gives you the right to call in, or buy, an asset. You trading on a call when the underlying asset increases in price. Call options are tips used by investors for three primary purposes. These option tax management, income generation and speculation. An options contract gives the holder the right to tips shares of the underlying security at a specific price, known as the strike pricecall until a specified date, trading as the expiration date.
As the value of Apple stock goes up, the price of the options contract goes up, and vice versa. Trading contract holders can hold the contract until the expiration date, at which point they option take delivery of the shares of trading or sell the options contract at any point before the expiration date at the market price of the contract at call time.
Investors sometimes call options trading a means of changing the allocation of their portfolios call actually buying or selling the trading security. For example, an tips may own shares of Apple call and be sitting on a large unrealized capital gain. Not wanting to trigger a taxable eventshareholders may use options option reduce the exposure to the underlying security without actually selling it.
Call only cost to the shareholder for engaging in this strategy is the cost of the options contract itself. Some investors use call options to generate income through a covered call strategy. This strategy involves owning an underlying stock while at the same time option a call option, or giving someone else the right to buy your stock. The investor collects the call premium and hopes the option expires worthless.
This strategy generates tips income tips the investor but can also limit profit potential if the underlying stock price rises sharply. Options tips give buyers the opportunity to obtain significant exposure to a stock for a relatively small price. Options contracts should be considered very risky if used for speculative purposes because of the high degree of leverage involved.
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