Options education is very important. Options are financial instruments that can provide you with flexibility in almost any investment situation you might encounter. Options trading education is critical, as strategies can be very complex. One doesn’t necessarily have to take an options trading course to become familiar with the nuances of these instruments commonly referred to as ‘derivatives’. Take some time to become familiar with the option education below.

Why Options?

Options are becoming increasingly essential to success in today’s stock market environment.

New financial times require new financial tools and options are a valuable tool in today’s markets.

• The beauty of the options is its tremendous flexibility.

• You can trade directional or non-directional.

• You can set your timeframe.

• You can set your risk/reward and probability of success based on your personal risk tolerance.

• Generate added income while you holding equities.

• Hedge against volatile short-term moves.

• Options lend customers a helping hand in accomplishing these financial goals.

For maximum efficiency and optimum results, you need a designated options account — one that gives you access online to get real-time option quotes and access to a state of the art electronic options trading systems, the SogoOptions trading platform.

Options are financial instruments that can provide you with the flexibility you need in almost any investment situation you might encounter. Options give you options by giving you the ability to tailor your position to your own situation.

• You can protect stock holdings from a decline in market price.
• You can increase income against current stock holdings.
• You can prepare to buy stock at a lower price.
• You can position yourself for a big market move — even when you don’t know which way prices will move.
• You can benefit from a stock price’s rise or fall without incurring the cost of buying the stock outright.

The following information provides the basic terms and descriptions that any investor should know as they learn about equity options.

Describing Equity Options

• An equity option is a contract which conveys to its holder the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) shares of the underlying security at a specified price (the strike price) on or before a given date (expiration day). After this given date, the option ceases to exist. The seller of an option is, in turn, obligated to sell (in the case of a call) or buy (in the case of a put) the shares to (or from) the buyer of the option at the specified price upon the buyer’s request.
• Equity option contracts usually represent 100 shares of the underlying stock.
• Strike prices (or exercise prices) are the stated price per share for which the underlying security may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract. The strike price, a fixed specification of an option contract, should not be confused with the premium, the price at which the contract trades, which fluctuates daily.
• Equity option strike prices are listed in increments of 1, 2 ½, 5, or 10 points, depending on their price level.
• Adjustments to an equity option contract’s size and/or strike price may be made to account for stock splits or mergers.
• Generally, at any given time a particular equity option can be bought with one of four expiration dates.
• Equity option holders do not enjoy the rights due stockholders — e.g. voting rights, regular cash or special dividends, etc. A call holder must exercise the option and take ownership of underlying shares to be eligible for these rights.
• Buyers and sellers in the exchange markets, where all trading is conducted in the competitive manner of an auction market, set option prices.

Calls and Puts

The two types of equity options are Calls and Puts.