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Do the same technical analysis methods used on options also apply to stocks?
I still don't understand what an option is... Investopedia states: "A privilege, sold by one party to another, that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed-upon price within a certain period or on a specific date." But that dosent help me much.
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Good, cheap, fast. pick any 2. -The Cap'n |
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Well options are derivatives of equity. You should learn the 5 greeks associated with options. They are Delta, Gamma, Rho, Theta, Vega. Options trading is based on leverage. Here's an example from Investopedia:
Leverage can be created through options, futures, margin and other financial instruments. For example, say you have $1,000 to invest. This amount could be invested in 10 shares of Microsoft stock, but to increase leverage, you could invest the $1,000 in five options contracts. You would then control 500 shares instead of just 10. One word of advice, paper trade for a year before you even think about trading options. Also, out of money options can be very deceiving. I don't trade out of money options anymore, I only trade in the money options. You have to get the direction, volatility, interest rate, and time right in order to make some green. Keep reading and you will see what I am talking about here. It's very complicated to profit from Options, but if you get it right you could be set for life. Just ask Jim Cramer. Last edited by nirav34 : 12-05-2006 at 01:32 PM. |