People usually think that investing money is equivalent to placing them on the bank for safekeeping. However, after a few years, they realize that it is simply stagnant while being safe. While their colleagues who have probably invested the same money in the stock market would have already earned in a month what you could only earn in years from the interest rates.

Soon they invest on stocks. Buying when they are low, selling when the prices are up. It seems like a never ending tennis match and you keep tilting your head from side to side as the ball is being tossed. If you are already feeling this way, then you should know that there is more to the stock market than you think.

Another element is called the options trading system. How is it any different from trading stocks. An option is a right to buy or sell a value linked to the contract at a an agreed time for an agreed price. This may be a simple thing to understand but here are a few jargons one should remember:

Writer – the one who sells the options
Writing – refer to as selling the options
Strike Price – the agreed price to sell or buy the products
Expiry Date – this is the last day where the rights in an option may be used
Call Option – the right to buy
Pull Option – the right to sell
Underlying Value – may be a stock, a property, contracts etc.
Premium – the price of the option

While an option grants you the right to buy or sell something, you are not required to exercise it. “Hey, that’s great!,” you would probably say the first time you hear about this. But then do not forget to be given this option, you must buy THE OPTION for an agreed price called the premium price. This amount is non-refundable, whether you exercise the right or not.

Now there are several instances where this set-up might be profitable for either parties. If the buyer decides not to buy or sell the underlying stocks, then the writer gets to keep his money (the premium) and at the same time gets to keep the stocks behind that option.

Why would you change your mind about buying it? Well, what if your strike price is $10 per share. Then when you have reached the expiry date, the value of the stock is only $5 per share. Why would you pay double the price of its current value right? And so you would simply have to forfeit the right to buy it.

Then if prices change, why even bother with the option trading system? I know it could be confusing already by the time you reach this part. Well the good thing is, the situation could be reversed. If you agreed on a $10 per share and the value of the same stock is now at $20 per share then you have already saved $10 more. You could even resell this immediately for its current value.

The good thing with option trading system, is there are several scenarios that you may use to profit money or prevent loss.

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