List of Options Contracts
As an investor, you have a lot of options when it comes to playing the stock market. One of those options is trading options contracts. Options contracts are a type of derivative that give you the right, but not the obligation, to buy or sell an underlying asset at a specified price within a certain time frame.
There are several different types of options contracts, each with their own unique characteristics and uses. Here`s a rundown of some of the most common options contracts you might encounter:
1. Call options
Call options give you the right to buy a specific stock at a specified price (the “strike price”) within a certain time frame. If the stock price goes up, you can sell the option for a profit or exercise it to buy the stock at a lower price than its current market value.
2. Put options
Put options give you the right to sell a specific stock at a specified price within a certain time frame. If the stock price goes down, you can sell the option for a profit or exercise it to sell the stock at a higher price than its current market value.
3. American options
American options can be exercised at any time before their expiration date. This gives you more flexibility, but also means that the option may be worth less than its European counterpart (see below).
4. European options
European options can only be exercised on their expiration date. This means they may be less flexible than American options, but may also be worth more.
5. Index options
Index options are based on an underlying stock index (such as the S&P 500). They can be used to hedge against market fluctuations or to speculate on the overall direction of the market.
6. Futures options
Futures options are options contracts based on futures contracts (which are agreements to buy or sell an asset in the future). They can be used to hedge against price fluctuations or to speculate on the future price of an asset.
7. LEAPS options
LEAPS (Long-Term Equity Anticipation Securities) options have longer expiration dates than traditional options (often up to three years). This gives you more time to wait for a stock to reach your desired price, but also means that the options may be more expensive.
8. Weekly options
Weekly options have shorter expiration dates than traditional options (typically one week). This allows you to make short-term trades based on market events or news.
Keep in mind that options trading is a complex and risky strategy that requires careful consideration and research. Be sure to consult with a financial advisor before making any investments.
Romuald Franck - MSc, Scrum Master
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