Options are in fact, a contract that exists between the buyer and seller. More specifically:

Call Option: An option contract that gives the owner the right to buy the underlying security at a specified price (its strike price) for a certain, fixed period of time (until its expiration). For the writer of a call option, the contract represents an obligation to sell the underlying stock if the option is assigned.

Put Option: An option contract giving the buyer the right to sell the underlying security at a specified price within a certain period of time. A put is purchased in expectation of lower prices. If prices are expected to rise, a put may be sold. The seller receives the premium as compensation for accepting the obligation to accept delivery, if the put buyer exercises his right to sell.

Continue reading to begin your exploration into the many advantages that these "contracts" offer.

Options have been available to trade for nearly 35 years. However, it’s only now that they have come to the forefront. The same options strategies exist now that existed then. Among other uses, options were the same great hedging vehicle then that they are now. They have always helped manage risk and "smooth" profitability. Why has it taken nearly 35 years for options to receive their "due"?

Credibility. Options are more complicated than stocks as well as being more powerful. There are many more risks involved in options trading aside from the price direction risk that they can share with stocks. Good "old fashioned" procrastination with regards to education has hindered options growth until very recently. Educated investors now UNDERSTAND options and that’s lead to increased credibility and an explosion in usage.

The lack of proper education in the options market can lead to the improper. When an instrument as powerful as an option is misused, large losses can and will ensue. This resulted in the media taking a negative outlook on options (they did not understand them either) and negative publicity followed.

There is no substitute for becoming educated and fully informed with regards to options. There’s also never been a better time to become involved in the options markets.

With the NASDAQ about to launch yet another options exchange that

will trade options based on "penny" spreads and with the SEC allowing options risk to now become "risk based", the tables have truly turned in favor of the INFORMED individual investor in this market.

Why invest in an options education? Quite simply, options are the only investment product that allows an investor to protect and enhance profits in any market environment.



What advantages do options give the investors? Well, first off, the markets move up, down and "sideways". Options strategies can be employed to profit from all type of market environments. PUT options allow an individual to conveniently profit from downside movement in stocks.

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