Day Trading Stock Options March 5th, 2010 If you have heard of this method of day trading and you are interested to find out more, let’s start by revealing that it isn’t the easiest method of trading you could try. A stock option allows you to buy a certain stock as defined by the option itself. This is time limited and fixed at a certain price as well. The key things to remember is the risk involved, as well as the fact that having this option, does not mean you have to go ahead and actually buy it. You also need to be aware that when you are day trading stock options there are two types you can use. Since all stock can be bought or sold, the two options relate to these two alternatives. If you have a call option it means you are exercising the right to buy that particular stock within the terms of the option contract. If you want the right to sell a stock, you need to have a put option. So you see it is very important to have the difference between these two clear in your head before you begin. The type of option you go for will depend on what you think might happen to the stock in question at the time the options contract is available and open for. Stocks that look likely to rise in value will be connected with call options, while falling stocks work best with put options. Of course every options contract you have will involve a certain amount of costs, regardless of whether you go ahead and buy or sell or not. Remember you are only buying the right to perform that action – you are not committing yourself to actually doing it. Needless to say though, it is not enough to have the option available, because it is time sensitive. If you don’t do anything with it you might regret it. It is possible to redeem the option if you don’t end up buying the stock, but since you are limited on time it is essential to understand and be familiar with what works. If you do not have the level of knowledge required to try and make the most of day trading stock options, you could lose a lot of money in this field. It is often best to trade in paper money and in practice first, before moving on to the real thing. Next, check out The Dean's penny stock picks that have made huge gains.
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