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Traders write an option by creating a new option contract that sells someone the right to buy or sell a stock at a specific price (strike price) on a specific date (expiration date). In other words, the writer of the option can be forced to buy or sell a stock at the strike price.
Example of an Option. Suppose that Microsoft (MFST) shares trade at $108 per share and you believe they will increase in value. You decide to buy a call option to benefit from an increase in the stock's price. You purchase one call option with a strike price of $115 for one month in the future for 37 cents per contract ...
You will have to typically apply for options trading and be approved. You will also need a margin account. When approved, you can enter orders to trade options much like you would for stocks but by using an option chain to identify which underlying, expiration date, and strike price, and whether it is a call or a put.
A share option is a contract pursuant to which one party has the right (but not the obligation) to acquire shares from another person or to sell shares to another person at a specific price (or at a price calculated ing to a specified formula) on a particular date or a range of dates or at any time during a ...
To buy a put option, follow these four steps: Choose the strike price: This will normally be somewhat below where the stock is currently trading. Choose an expiration date: This could typically be from a month to a year in the future. ... Decide how many contracts to buy: Each option contract is for 100 shares of stock.