What are the three different types of on-line trading option and do they involve a contract?”
Bullish strategies Bullish options strategies are employed when the options trader expects the underlying stock price to move upwards. It is necessary to assess how high the stock price can go and the time frame in which the rally will occur in order to select the optimum trading strategy. The most bullish of options trading strategies is the simple call buying strategy used by most novice options traders. Stocks seldom go up by leaps and bounds. Moderately bullish options traders usually set a target price for the bull run and utilize bull spreads to reduce cost. (It does not reduce risk because the options can still expire worthless.) While maximum profit is capped for these strategies, they usually cost less to employ for a given nominal amount of exposure. The bull call spread and the bull put spread are common examples of moderately bullish strategies. Mildly bullish trading strategies are options strategies that make money as long as the underlying stock price does not go down by
What Are Options? There are two basic types of options on futures contracts: “calls” and “puts.” A call option on futures contracts conveys the right (but not the obligation) to the buyer to purchase a specific futures contract (for example, a corn contract for a December 1997 delivery month) at a particular price during a specified period of time. A put option conveys the right (but not the obligation) to the buyer to sell a specific futures contract at a given price during a specified period of time. The price for which the futures contract can be bought (in the case of a call option) or sold (in the case of a put option) under the terms of the option contract is referred to as the option’s strike price or exercise price. The date on which an option expires–the date after which it can no longer be exercised–is the option’s expiration date. The price of a specific option, that is, the amount of money paid by the buyer of an option and received by the seller of any option, is the opt
