Go to http://www.amazon.com/gp/product/B00JFB3V7O to learn all about Option Contract. In this video, we're going to go over what a call option is, and what a put option is. For most of the strategies, especially the ones that we talked about, that we use in this series, for SFW and ratio trading - SFW stands for Small Frequent Wins. That's a strategy that I've developed, proprietary to my system. Ratio trading is very similar to pair trading, but it's a little bit different. We're going to get into that a little bit later. Right now, because most of the strategies that I'm going to present you with use call options and put options, it's important to get a good, solid foundation for understanding what a call option and a put option are. There are also different variables that affect the prices of call options and put options. Let's start with a call option. On the screen in front of you, there is what's called an option chain. That means that there are various different options available for one particular instrument. In this case, it's the PowerShares QQQs, which is an ETF. It starts out with a strike price of $27, and it ends with a strike price of $76. Those are the only strike prices available for this particular ETF. On the left side, you have call options, and on the right side, you have put options. A call option gives the owner the right - but not the obligation - to purchase a specific security at a set price, during a set period of time. In other words, this particular option chain that we're looking at expires in 7 days. These are the December 2011 options - call options and put options. A person who is interested in seeing the QQQs go up would buy a call option. A person who is interested in playing from the short side of this market would buy a put option. If they thought the QQQs were going down, they would buy a put option. Now, the buyer of an option call wants the stock market to go up. The seller of a call wants the stock market to go down, or at least stay very near its current level. There are specific reasons for that, which we'll go into very shortly. Everything highlighted in gray here, on both sides - we'll start with the calls first - are in the money calls. It is one strike price lower than the actual level of this financial instrument. For example, if you see the line right here at 56, these are what are called at the money calls. It's very close to the current price of the financial instrument - in this case, the ETF. Anything below that, on the call side, is what's considered the in the money. Anything above that strike price, above the current price of the ETF, is considered to be out of the money. It's at least one strike price higher than the actual level of the ETF. These are the prices. For more videos on Option Contract be sure to check out our channel: http://www.youtube.com/channel/UCXr2lclULvZAUS7iaKfLQlg To learn more about the Genius Trading System course go to: http://www.amazon.com/gp/product/B00JFB3V7O Additional Tags ================ vertical spreads, options greeks, what is options trading, iron condor, option volatility, option spreads, options volatility, how to trade in options, option strategies, index options, equity options, virtual trading, options spreads, virtual options trading, options trading tutorial, option trading strategy, options trading course, how to trade stock options, options trading systems, options training, learning options, learn to trade options, option trading tutorial, options trading strategy, option trading course, option trading systems, options trading basics, option trading basics, option trading system, options trading courses, options trading training, trade options, what is a stock option, options strategies
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Duration: 7m 17s
Rating: 2