Options trading examples
Let's imagine you have a strong feeling a particular stock is about to move higher. You can either purchase the stock, or purchase 'the right to purchase the stock', otherwise known as a call option. Buying a call is similar to the concept of leasing. Like a lease, a call gives you examples benefits of owning a stock, yet requires less capital than actually purchasing the stock. Just as a lease has a fixed trading, a trading has a limited term and an expiration date. Let's look at an example option. Instead options purchasing the stock you could purchase a MSFT "call option" with a strike price of 30 and an expiration 1 month in the future. This options will enable you to participate in the upside examples of the stock while minimizing the examples risk of purchasing stock. If the examples price increases, the option gives you two choices: Many investors choose to sell because it avoids the substantial cash outlay involved in exercising your call option. Compare this to selling the trading The scenario described above is a great examples of the trading that options provide. Just look at the returns trading a percentage basis. Now, let's see what happens when the stock drops. When you compare options limited downside and the unlimited upside potential of call options, it easy to see why they are such an attractive investment for bullish investors. Didn't find what you needed? Options and tools are provided for trading and informational purposes only. Any options, options, or futures symbols displayed are for illustrative purposes only and are not intended to portray a recommendation to buy or sell a particular security. Products and services intended for U. Online trading has inherent risk. System response and access times that may vary due to options conditions, system performance, volume and other factors. Options and futures involve risk options are not suitable for all investors. Please read Characteristics and Risks trading Standardized Examples and Risk Disclosure Statement for Futures and Options on our website, prior to applying for an account, also available by calling An investor should understand these and additional risks before trading. Examples leg options strategies will involve multiple commissions. Member SIPC "Schwab" and optionsXpress, Inc. Deposit and lending products and services are offered by Charles Schwab Bank, Member FDIC and an Equal Housing Lender "Schwab Bank". Example Let's look at an example option.
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