An options contract is a derivative security that derives its value from the behavior of an underlying security, asset or commodity. Unlike many securities, options are issued or “written” by fellow investors, and are bought by other investors. The writers, or sellers, of an options contract make a premium on the sale, which is how they make money.
There are several reasons why investors will buy and sell options, and the transactions of those options are what fuel the overall options market. Buyers will pay the seller a premium, but in turn they get the option to exercise that contract – often to buy or sell a security – at a specific price in the future.
Options are usually a tool for more seasoned investors. On FlashCourse, you can get up to speed on how you can use them yourself. Get the free FlashCourse app for iOS and Android to learn more.
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Chapters In This Course Include…
- Key Factors
- Writing Calls
- Buying Puts
- Writing Puts
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