Learn about investing, trading, retirement, banking, personal finance and more.
Options are contracts used by investors to take a speculative position – or a hedge – based on expected future price movements of the underlying securities.
Many investors are scared when they heard the word "option" and perceive it as a risky, speculative investment. Options certainly can be risky, but they don’t have to be. In fact, certain options strategies are far more conservative than many available investments in the marketplace.
They can be used alongside other assets in a portfolio, possibly providing hedges against specific risks, or they can be used on their own, creating elaborate strategies with various combinations of options positions. They can be used as a conservative instrument to protect profits and add income, making the overall portfolio less volatile.
On the other hand, the aggressive use of options can be extremely dangerous and result in potentially infinite losses. Options themselves can either be Calls or Puts, but these can be used to take a variety of positions since they can be written, short-sold, bought and held long, or sold outright, and all of these transactions can be used to “open” or “close” a position.
Options positions attempt to profit from an opinion the investor holds about where the price of an underlying security will move by the expiration date of the contract. An option contract exists between two investors, where one is paid a premium for the right to hold the contract, and one party has the right to buy or sell the underlying security at a specific price, called the strike price, and the other is obligated to buy or sell it at that price when and if the other exercises his or her rights in the contract.
Options prices are updated constantly and are available online. The price of options contracts available on a given security is detailed in an option chain. In this section, we hope to give you a working knowledge of options and some common strategies.
A limited liability company (LLC) establishes a separate entity from the sole proprietor or partners in a business
An old saying stipulates that you should sell your positions on Rosh Hashanah, and establish a new position on Yom Kippur
There is a hierarchy of which creditors and investors will be serviced first in the event that a company goes bankrupt
As of 2016, if you are under 50 years old, you are allowed to contribute $5,500 a year to your Roth IRA
More complicated wills usually require the help of an attorney who can help you and guide you through the process
Accounts Receivable is part of the Assets on a Balance Sheet, and it details the money due to the company
A multiple is a measure of a stock’s value, calculated by comparing one metric to another. The most commonly used is P/E
Leverage is the use of borrowed capital or debt to try and increase the potential return of an investment
The purpose of investment property is to provide income through rental or lease, or to be sold at a later time
The Falling Wedge pattern forms when a currency pair price appears to be spiraling downward with two down-sloping lines