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THE OPTIONS COURSE- The Big Picture

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THE OPTIONS COURSE The Big Picture OPTIONS Options are probably the most versatile trading instrument ever invented.  They provide a high-leverage approach to trading that can significantly  limit the overall risk of a trade, especially when combined with stock or  futures. As a result, understanding how to develop profitable strategies  using options can be extremely rewarding, both personally and finan cially. The key is to develop an appreciation about how these investment  vehicles work, what risks are involved, and the vast reward potential that  can be unleashed with well-conceived and time-tested trading strategies. First, it is important to differentiate between futures and options. A  futures contract is a legally binding agreement that gives the holder the  right to actually buy (and take delivery of) or sell (be obligated to de liver) a commodity or financial instrument at a specific price. In contrast,  purchasing an option is the right, but not the ob

THE OPTIONS COURSE- The Big Picture

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THE OPTIONS COURSE The  Big  Picture Trading involves a variety of different in vestment vehicles in addition to options: stocks, futures, commodities,  exchange-traded funds (ETFs), and indexes. These financial instru ments can be assembled in an infinite number of combinations. My own  trading focuses on stocks and options. Yet, an appreciation of all these  tools can help build an integrated understanding of what is happening day  to day in the financial marketplace. So, let’s take a closer look at the funda mental components of each investment vehicle to see how one differs  from the other. STOCKS Those of you just starting in the field of investment have most likely heard  about one popular financial instrument: the stock. In fact, thousands of  stocks are traded on the U.S. stock exchanges every day. But what exactly  is a stock? Basically, a stock is a unit of ownership in a company. The value  of that unit of ownership is based on a number of factors