When you buy a call option you profit when the price of the underlying stock rises above the strike price specified in your option contract.  But, in reality rising past strike price isn’t enough as it doesn’t take into account the premium you paid to buy the contract in the first place.  If you bought [...]

A simplistic view of equity markets is that, when you place a buy order, you’re actually being paired up with another investor who owns that stock and a middleman like your brokerage or the exchange simply matches the two of you up. In reality, there are rarely enough buyers for all the sellers or sellers [...]

A protective put strategy is an option trading strategy that lets you protect profits you’ve already earned from being long in a particular stock.  Rather than entering a stop loss order which would sell your position once the stock fell to a certain price, protective puts let you protect your downside risk without automatically closing [...]

A strangle option is a pair of option contracts that are designed to bring the trader profit based on the amount of a price move and not the direction of a price move.  With a standard option contract, the strike price is set and the trader profits based on whether he or she buys a [...]

How do options work?  Options on stock let you bet on the direction a stock’s price is going to move on the stock market.  There are two types of options contracts, call options and put options, that you can either buy or sell through brokerages depending on which way you think the stock covered by [...]

Behind put call ratio are the are two main schools of thought when it comes to predicting market price movement. First are the fundamental analysts that use factual information about a corporation’s profits and losses, valuation, and other empirical data to come up with a fair market value for the stock. Technical analysts, on the [...]

Profiting from selling a put option is exactly opposite profiting from buying a put option.  You buy a put option when you expect the price of the underlying stock to go down while you sell a put option when you expect the price of the underlying stock to go up. Here’s why. By selling a [...]

A put option is the opposite of a call option and you buy a put for exactly the opposite reason that you buy a call.  When you buy a call you’re expecting the price of the underlying stock to rise but when you buy a put you’re expecting the price of the underling stock to [...]

Profiting from buying a call option is fairly straight-forward.  You expect that the price of the underlying stock will go up so you purchase the right to buy that stock at a predetermined strike price in the future.  If the price does rise, you profit based on how high it rose compared to the strike [...]

When you buy a call you’re entering into a contract giving you the option to buy 100 shares of stock (the underlying stock) at a specific price (the strike price) by a specific expiration date. Although you’re the one entering into this contract, it’s actually more binding on the seller of the contract than on [...]