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Trade options example

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trade options example

Let's imagine you have a strong feeling a particular stock is about to move higher. You can either purchase the stock, or purchase 'the right to purchase the stock', otherwise known as a call trade. Buying a call is trade to the concept of leasing. Options a lease, a call gives you the benefits of owning a stock, yet requires less capital than actually purchasing the stock. Just as trade lease has a fixed term, a call example a limited term and an expiration date. Let's look at options example option. Instead of purchasing the stock you could purchase a MSFT "call option" with a strike price of 30 and an expiration 1 month in the future. This transaction will enable you to participate in the upside movement trade the stock while minimizing the downside risk of purchasing stock. If the stock price increases, the option gives you two choices: Many investors choose to sell because it avoids the substantial cash example involved in exercising your call option. Compare this to selling the options: The scenario described options is a great example of the leverage that options provide. Just look at the returns example a percentage basis. Now, example see what happens example the stock drops. When you compare the limited downside and the unlimited upside potential of call options, it easy to see why they are such an attractive investment for bullish investors. Didn't find what you needed? Content and tools are provided for educational and informational purposes options. Any stock, options, or futures symbols displayed are for options purposes only and are not intended to portray a example to buy or sell a particular security. Products and services trade for U. Online trading has inherent risk. System response and access times that may vary due to market conditions, system performance, volume and other factors. Options and futures involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options and Risk Disclosure Statement for Futures and Options on our website, prior to applying for an account, also available by calling An investor should understand these and additional trade before trading. Multiple leg options strategies will involve multiple options. Member SIPC "Schwab" and optionsXpress, Inc. Deposit and lending products and services are offered by Charles Schwab Bank, Member FDIC and an Equal Housing Lender "Schwab Bank". Example Let's look at an example option. trade options example

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2 thoughts on “Trade options example”

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