A stock option is a derivative of a stock. It’s an option that is a derivative of the stock. It is, for our purposes a trading instrument that gives us the right but not the obligation to own a certain stock at a certain price if we are buying that option. The reverse is true if we are selling that option short ( which is called writing an option, naked options, or just plain selling that option).

Options have several properties that define their character and behavior. You can buy options that profit from the stock going up. And you can buy options that profit from the stock going down. You can sell options that profit from the stock going off. Then you can also sell options that profit from the stock going down.

The options that increase in value when the stock goes up or called call options the options that increase in value and the stock goes down or call put options. You can simply buy call options and put options as a strategy or you can combine a variety of long and short calls and puts to form some very interesting and creative options strategies.

You can go to:   www.cboe.com to learn a lot more about options, how their forms and start to study option price tables. You want to get to know how stock options behave so you can start to trade them well.

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