The Day Trader System Podcast #1

Allen Maxwell Scott Paton

Oct 29 2010

Option trading is probably one of the least understood forms of investment that however can offer a wealth of possibilities for those who get involved into it.

Such major option trading markets as the Chicago Board of Options Exchange, the American Stock Exchange, the Philadelphia Exchange, the Pacific Exchange and the New York Stock Exchange in the USA as well as markets in London, Tokyo and other world megapolises make great profits in option trading as well as in forex currency options trading.

Option trading is becoming more and more popular among individual traders, professionals and institutional investors as it may be extremely rewarding provided that the decisions are well-elaborated and grounded on research. Like all investments, option trading carries a certain element of risk. Raise cash safely and immediately... Let help you to make money quickly.

So, what is option trading system all about?

Basically, options are contracts concluded between two parties, the buyer and the seller, giving the former rights for the purchase or sale of some underlying asset, with specification of price and validity period. They are also called derivatives for two reasons: the first one claims that option trading derived from stock and futures trading; and the other one explains that option price always depends on (derives from) the value of the underlying (be it stock, index or some commodity).

Option buyer (holder) can exercise his/her prepaid option to dispose of some financial product within agreed time interval but is not obliged to do it. On the other hand, option seller (writer) is obligated to agree to either of the buyer's decisions. An obvious advantage of option trading is that money can be made without large investments of capital. You can look for a more detailed Option Trading Definition in the respective article by clicking on the link.

Calls and Puts
The two types of options are calls and puts:

A call gives the holder the right to buy an asset at a certain price within a specific period of time. Calls are similar to having a long position on a stock. Buyers of calls hope that the stock will increase substantially before the option expires.

A put gives the holder the right to sell an asset at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts hope that the price of the stock will fall before the option expires.