What is exchange traded options

Learn something new every day More Info Exchange traded options are contracts that give the right, but not the obligation, to purchase or sell financial products. Exchange traded option contracts also typically specify the underlying exchange, quantity and expiration date.

While the right to buy or sell the product can what be exercised on or before the expiration date, the option becomes void after the expiration date. Exchange traded options can either be call options or put options. A call option provides the ability to buy the what asset, and a put option secures the right to sell the underlying asset.

If an investor believes a stock price is going to increase, he or she may retain a call option in order to benefit from traded stock's rise. On the other hand, if a stock owner believes a stock price is going to drop in the future, he or exchange may try to secure a put option.

While many types of ETOs exist, exchange traded stock options are one of the most common forms. Stock options work the same as other ETOs, allowing investors to buy or sell stock at the strike price on or before the expiration date. What frequently traded ETOs may include exchange traded currency optionscommodity options and exchange-traded futures and options.

Investors can realize a number of advantages by using exchange traded options. One key benefit can be the ability to lock in a buying or selling price. This allows buyers and sellers to what against exchange falls or rises in traded. Exchange traded options are generally considered liquid investments because they can options bought and sold relatively easily. This may be an added benefit for buyers and sellers that wish to maintain the liquidity of their assets.

Sophisticated traders often use exchange traded options to speculate on potential trades. Traders may profit from their views about the future direction of an option by locking in prices in advance.

For example, buyers may seek to purchase exchange traded stock options what less than their current prices. Depending on how the market shifts, this could lead to significant profits. Exchange traded option can also provide the ability to generate income through using strategies like short-selling or writing exchange against existing shares. ETO contracts can be traded options regulated exchanges, and their terms are generally dictated by options standards that apply to such exchanges.

Exchange, exchange traded options are traded through full-service brokers, discount brokers or advisors that provide trade execution services. Before making investment decisions, an investor with limited time or trading experience may need additional advice on the market risks associated with specific options.

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This Day in History. The first Sony Walkman was sold. You exchange also Like. Related wiseGEEK Articles How Do I Exercise Stock Options What Is an Average Rate Option? How Traded I Become an Options Broker? What is an Autoquote? What is traded Montreal Exchange? In Finance, traded are Quality Options? Options Finance, what is an Expiration Time? Discuss this Article Post your comments. Please enter the code: Login username password forgot password?

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What are Exchange Traded Stock Options?