You often see the phrase 'options and futures', as if the two were financial Siamese twins. But, though
these two instruments are similar, there are important differences the savvy investor should keep in mind.
However, there is an essential difference between the pair. Both are contracts binding two parties, but the terms of that contract define the difference.
(Note: This is only partially accurate since, in practice, futures contract buyers typically put down a deposit
(called a margin) of around 5% to 10% of the price of the underlying asset. But the futures contract itself doesn't cost anything but a small commission.)
The contract requires the buyer to either purchase the 'goods' by the deadline (which
is rare), or sell the contract to another party. So, the financial obligation is, at least in principle, potentially very large.
These contracts typically are actively traded until just before settlement time, at which time a buyer - one appropriate to that commodity - purchases the actual goods and re-sells them.
Some do, such as employees of companies granting options as part of employment compensation packages. And a small percentage of a very large number is still a substantial number of
For example, in April a June 17 call on Microsoft might have a strike price of $25, with a current market price of $27 per share.
Assuming the cost of the option (and commissions) averages less than $2 per share the investor can realize an immediate profit by selling the call or exercising the option.
For most people, options are the way to go as your risk is limited to the premium paid. However, you can still lose plenty of money if you don't know what you are doing.
And if you'd like to cut out all the hype and B.S. about learning to trade options and learn EXACTLY how to do it right from an expert, check out The Options University.
Your membership includes everything you need to start trading options profitably TODAY! Visit The Options University today...
Visit Our Premium Partner
Here To Return To The Options Information Home Page
Yoga Removing Unwanted Hair Health Insurance Getting Rid Of Acne Dog Ownership, Training And Care Baby's First Year Blogging For Fun And Profit Buying A Car How to Cut Your Wedding Costs Enhance Your Love Life Credit Cards Skiing Web Hosting Get In Shape Get A Good Night's Sleep Start An Investment Club Steam Bathing Home Theater Stop Smoking Writing a Killer Resume How To Ace An Job Interview Lose 10 Pounds Low Carb Diet Program Start An Online Auction Business From Home Online Dating Radio Controlled Cars Reduce Stress Creating Better Relationships Scrapbooking For Beginners Setting And achieving Your Goals Add Value To Your Home Stop Snoring Quickly Start Your Own Retail Business Time Management Tips Stop Email Spam Proven Success Tips Cat Ownership And Care Chess Fishing Rose Gardening Beaudesert Web Marketing Beaudesert Plumber