What do the terms American-style and
European-style mean when referring to options?
An American-style option may be exercised at any time prior to its
expiration. A European-style option may be exercised only during a
specified period before the option expires. Currently, every
European-style option is exercisable only on its expiration date.
Currently, all exchange-traded equity options are American-style.
Most index options are European-style. I would check each index
product that you are interested on trading to verify, among other
things, the options exercise style. The Option Industry Council (OIC)
has compiled a
list of index options that are currently available along with a
link to the product specifications for each item on the list.
How do I read options quotes?
An options' quote will typically offer the following information: Last -
Indicates an options' last reported
sales price. Net - An options' net price change on the day. In the
event the "Net" column displays a 'pc', no transactions have been
reported for the current trading day, thus there is not a
reported price change. *Bid - The highest price any one is willing to pay for the
options contract. *Ask - The lowest price any one is willing to receive for
the options contract. Volume - Displays the volume (in options contracts) that
has traded for the current day.
*The
options market is quote driven. It is possible, for example, for an
options contract to go several minutes, days or even weeks without
trading. Although there have not been any trades, it is likely that
an options' quotes have been updated many times during the trading
day. Specialists and market makers at the options exchanges are
regularly updating and refreshing options quotes (the options' bid
and asks) to reflect changes in the underlying security price,
volatility or overall market conditions.
How do I find a broker?
Talk with potential sales people at several firms. Ask each sale
representative about his or her investment experience, professional
background, and education. Visit Option Industry Council (OIC)'s
Broker Contact page for a list of brokerage firms and options contacts.
Investors can find out about the disciplinary history of any brokerage firm
and sales representative by calling 1-800-289-9999, a toll free hot line
operated by the National Association of Securities Dealers, Inc (NASD). The
NASD will provide information on disciplinary actions taken by securities
regulators and criminal authorities. State securities regulators also can tell
you if a sales representative is licensed to do business in your state.
You will want to understand how the sales
representative is paid; ask for a copy of the firm's commission schedule.
Firms might pay sales staff based on the amount of money invested by a
customer and the number of transactions done in customer's account. More
compensation may be paid to a sales representative for selling a firm's own
investment products. Ask what fees or charges you will be required to pay when
opening, maintaining, and closing your account.
Determine whether you need the services of a
full service or a discount brokerage firm. A full service firm typically
provides executions services, recommendations, investment advice, and research
support. A discount broker generally provides execution services and does not
make recommendations regarding which securities you should buy or sell. The
charges you pay may differ depending on what services are provided by the
firm. Links to various brokerage firms web sites, many of which may offer
online trading, can be found on OIC's
Brokerage list.
What is an Exchange?
In the financial markets, an exchange refers to a securities exchange where
stocks, options and/or futures contracts are traded by members of the exchange
or their own accounts and the accounts of their customers. These exchanges are
registered with and regulated by the Securities and Exchange Commission (SEC).
The five U.S. exchanges that list and trade equity, ETF and index options
contracts are:
This book describes just about every
fundamental strategy you could try with options. It covers the total return
concept of covered call writing, the pros and cons of option buying, examines
various types of spreads (vertical, calendar, and diagonal) and the various
delta (price) neutral strategies. If you have to have only one book on options,
this will be it.
Spend less than you earn! People who spend every penny
they make usually end up going broke.......
Take enough risk on the money you save! Playing safe by
putting your money under the mattress or in a savings account
will not make you wealthy..
Remember that.....Fully one-fifth of humanity, some 1.3 billion people,
struggles to survive on less than $1 per day. About 40% of
humanity survives on less than $2 per day. More than a billion
people around the world will go to bed hungry tonight. Life
expectancy in some 32 countries is less than 40 years. If you
have a few extra dollars in your pocket (you don't have to be a
millionaire to make a difference), please share some of your
financial good fortune with others who are in great need.
Think About It... Being in the 'now' brings a freedom, unlike living
in the past or in the future, which is a kind of imprisonment.
This isn't a kind of a denial where you pretend life doesn't have
problems. Life is full of problems, but most of those stresses
and failures are reliving old hurts or worrying about future
concerns. -- Carl Honore
When you 're diagnosed with cancer, you start to
bargain with God: "Let me get through this, and I'll take better
care of myself. I'll get my priorities in order. I'll learn to
live every day to the fullest." Isn't it sad that you have to get
sick before giving yourself permission to live life to the
fullest? -- Robert Schimmel
Look at Life in different & Positive ways
