The Complete Option Report


	Free Trial Offer: Get The Weekly Option Report You'll get fresh stock option trading ideas, strategies, and option techniques just for asking - no cost, no obligation. Plus you'll get Ken Trester's stock options market commentary. No Charge - Subscribe Now - Cancel Anytime. Enter Your E-Mail Address Below	A Guide Around the Options World: Some Definitions I know this is boring stuff but when some one asks you a question or tells you how to make a trade you better know what he's talking about. Your risk if you are uncertain? You'll lose money and I know you're not here to do that. While trading options is not hard there is, in some cases, unique language and terms. Here's a quick around the world of options lingo... But First What is an Option? Options are perhaps the most versatile tool in all of the investment world. You can use options to make very simple but profitable trades, or they can be part of complex trades for a variety of investment goals. To achieve success you need to understand a few terms. The terms are not hard to understand. In the end buying and selling options is no more complex than buying and selling stocks. When you buy an option you are renting the profit right to a stock for a limited amount of time. The easiest way to explain what an option is and what it does is this: You are paying a rental fee for the stock. During that time you get all of the stock`s potential profits except dividends. The technical definition is... "An option is a contract that gives one person the right, but not the obligation, to purchase or sell a set amount of a stock at a set price for a set amount of time." Our explanation is simpler. They both mean the same thing. 2 Types of Options #1 A call option gives its owner the right to buy the underlying stock. Call option buyers want the stock price to rise, as you would if you bought the stock. #2 A put option gives its owner the right to sell the underlying stock. Put buyers want the price of the stock to fall. Generally, when you buy a call option you will make money if the stock price goes up, and if you buy a put option you`ll make money if the stock price declines. New option traders are surprised that you can make money if a stock goes down -- but you can! It`s just one of the great things about options. Options Terms: A Glossary Underlying Stock: This is the stock the option contract gives you the right to buy or sell. If you buy an option on IBM the underlying stock is IBM. Strike Price: This is like the finishing line in a horse race. When the price of the stock goes past the strike price (the finishing line) your option begins to make almost dollar for dollar profit, just like the higher priced stock. This is where you want the stock to go -- up in price if it is a call option, down in price if it is a put option. Once you reach the strike price the big profits begin to kick in. Expiration Month: This is the month in which the option expires. Remember, options are similar to rental agreements -- they don`t last forever. Stock options expire on the Saturday following the third Friday of each month. An XYZ October 30 call gives the option buyer profit rights through the third Friday in October. Premium: This is the price paid by you, the option buyer. One stock option controls 100 shares of the underlying stock, and option premiums must be multiplied by 100 to determine their cash value. A premium of 1 means $100 per contract. Limit Order: The cornerstone of all of our recommendations in The Complete Option Report is an option’s price. Don’t pay more for an option than the price we recommend. If you pay too much for an option you ruin the strategy. The best and easiest way to get the correct price that we list is to tell your broker to use a "limit order." Limit orders are usually good for one day. If the option price moves higher before you can purchase it, wait a few days and try again if the stock price is still the same and the option has a few months until expiration. Using a limit price will keep you from chasing the option and busting the strategy. Don`t worry if you don`t get the order immediately. The market is open 5 days a week, 52 weeks a year. You can always go back and try again the next day. Just be certain that the stock and option prices are still in line with our recommended prices. Price is the key to success in the options market. When you pay too much to buy an option the odds are stacked against you. Finding underpriced options is simple in theory but in the real world it takes an enormous amount of work. We have developed a computer pricing model that does this better than anyone else. Take advantage of it. If you choose to subscribe you'll get this advice! If you're going it alone then just be certain that you're paying a fair price when you buy an option. Option Contract: When you buy an option you are buying a "contract." One contract controls 100 shares of stock. So the true cost of an option is its quoted price multiplied by 100. For example, if you buy an option quoted at 1, it will cost you $100. An option quoted at 1/2 costs $50.

Free Trial Offer: Get The Weekly Option Report

You'll get fresh stock option trading ideas, strategies, and option techniques just for asking - no cost, no obligation.

Plus you'll get Ken Trester's stock options market commentary. No Charge - Subscribe Now - Cancel Anytime. Enter Your E-Mail Address Below

A Guide Around the Options World: Some Definitions

I know this is boring stuff but when some one asks you a question or tells you how to make a trade you better know what he's talking about.

Your risk if you are uncertain? You'll lose money and I know you're not here to do that.

While trading options is not hard there is, in some cases, unique language and terms. Here's a quick around the world of options lingo...

But First What is an Option?

Options are perhaps the most versatile tool in all of the investment world. You can use options to make very simple but profitable trades, or they can be part of complex trades for a variety of investment goals.

To achieve success you need to understand a few terms. The terms are not hard to understand. In the end buying and selling options is no more complex than buying and selling stocks.

When you buy an option you are renting the profit right to a stock for a limited amount of time.

The easiest way to explain what an option is and what it does is this: You are paying a rental fee for the stock.

During that time you get all of the stock`s potential profits except dividends.

The technical definition is... "An option is a contract that gives one person the right, but not the obligation, to purchase or sell a set amount of a stock at a set price for a set amount of time." Our explanation is simpler. They both mean the same thing.

2 Types of Options

#1 A call option gives its owner the right to buy the underlying stock. Call option buyers want the stock price to rise, as you would if you bought the stock.

#2 A put option gives its owner the right to sell the underlying stock. Put buyers want the price of the stock to fall.

Generally, when you buy a call option you will make money if the stock price goes up, and if you buy a put option you`ll make money if the stock price declines.

New option traders are surprised that you can make money if a stock goes down -- but you can! It`s just one of the great things about options.

Options Terms: A Glossary

Underlying Stock: This is the stock the option contract gives you the right to buy or sell. If you buy an option on IBM the underlying stock is IBM.

Strike Price: This is like the finishing line in a horse race. When the price of the stock goes past the strike price (the finishing line) your option begins to make almost dollar for dollar profit, just like the higher priced stock. This is where you want the stock to go -- up in price if it is a call option, down in price if it is a put option. Once you reach the strike price the big profits begin to kick in.

Expiration Month: This is the month in which the option expires. Remember, options are similar to rental agreements -- they don`t last forever. Stock options expire on the Saturday following the third Friday of each month. An XYZ October 30 call gives the option buyer profit rights through the third Friday in October.

Premium: This is the price paid by you, the option buyer. One stock option controls 100 shares of the underlying stock, and option premiums must be multiplied by 100 to determine their cash value. A premium of 1 means $100 per contract.

Limit Order: The cornerstone of all of our recommendations in The Complete Option Report is an option’s price.

Don’t pay more for an option than the price we recommend. If you pay too much for an option you ruin the strategy.

The best and easiest way to get the correct price that we list is to tell your broker to use a "limit order." Limit orders are usually good for one day. If the option price moves higher before you can purchase it, wait a few days and try again if the stock price is still the same and the option has a few months until expiration.

Using a limit price will keep you from chasing the option and busting the strategy. Don`t worry if you don`t get the order immediately. The market is open 5 days a week, 52 weeks a year. You can always go back and try again the next day.

Just be certain that the stock and option prices are still in line with our recommended prices.

Price is the key to success in the options market. When you pay too much to buy an option the odds are stacked against you. Finding underpriced options is simple in theory but in the real world it takes an enormous amount of work.

We have developed a computer pricing model that does this better than anyone else. Take advantage of it. If you choose to subscribe you'll get this advice!

If you're going it alone then just be certain that you're paying a fair price when you buy an option.

Option Contract: When you buy an option you are buying a "contract." One contract controls 100 shares of stock. So the true cost of an option is its quoted price multiplied by 100. For example, if you buy an option quoted at 1, it will cost you $100. An option quoted at 1/2 costs $50.