Understanding buying call options example
Option traders will buy calls when they think the underlying stock or index will move up. One of the most understanding buying call options example advantages of a call option is that it is much cheaper to buy than buying the stock itself. However, like all options, you have to plan your trade to make sure you are not taking on too much risk. A call option gives you the right to buy the stock for the strike price. In the chart below you understanding buying call options example see Oracle Corp ORCL beginning to break out of a consolidation range in the direction of the prior positive trend.
In this case, you could have purchased a call option ideally with a strike price as close to the current stock price as possible to take advantage of higher prices in the future. Understanding buying call options example was June 20th, 37 days into the future. Many traders assume that you must hold an option until expiration before harvesting profits.
This is not the case. The call option itself will rise in value as the price of the stock moves, and you can sell it at any time before expiration and collect profits. There are three things that you should learn from the example above. First, you can buy and sell an option contract whenever you want. You do not need to wait for expiration.
In the video, we will talk about how time value works in the option market and why it is something you need to understand and plan for.
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