Option Trading?

Question

In the stock market what does option trading mean?

I am using sharebuilder.com and has that its $15.95 + $1 fro each contract. What exactly does that mean.

Thanks. :)

Answer 1

Options are contracts to buy or sell 100 shares of the underlying stock for a set price up to a set date.

Investors buy or sell these contracts based on what they think the underlying stock will do. It is a way to leverage or insure you investments.

If you want to trade go with a brokerage geared towards option trading. I use Trade King which charges $4.95 + $.65 per contract. Commissions can be a big cost on options trading, so look for a better deal.

I have a blog on options trading: http://coveredcall.wordpress.com/

Answer 2

An option contract is the right to buy or the right to sell 100 shares of stock at a specified price. Conversely, if you are the writer, you are obligated to purchase or obligated to transfer shares. They are quite costly and most people lose their shirts. It requires a lot of knowledge and skill to make money using them, unless you are buying options, such as call options, to preserve the current price level into the future to permit you to save up money to buy certain shares in the distant future as cash eventually permits.