Why triple witchcraft always strikes a spell

Why triple witchcraft always strikes a spell

Options trading affects stock prices. That’s a fact. What a lot of people don’t understand is that options are really all about intentions, and people who write, buy and sell options contracts have many different intentions. However, the sum of all option trades, regardless of intent, results in events that change stock prices. This is a very important thing to understand in the markets in general. A general point that is misunderstood by investors and traders is the impact that option contracts will have on various stocks. What are some of the main uses of options? Consider them. First, someone might buy a call if they think a stock will go up in value, and they can buy a put if they think it’s going to go down in value. If they are correct and the move occurs before the options expire and even before the time value declines, they can make money on the move of the stock by using options. Second, someone might write a call if they own a stock and don’t want to sell it, but they don’t think it will increase for a while. They collect the money by writing the call and then if it expires, they keep that money while still owning the stock. The same can be said for writing a put if the stock is short. It is a way to collect income without the stock actually moving and without having to lock in a taxable transaction on the stock itself. Third, someone can use multiple options contracts in different ways to create scenarios where they can have limited risk while still making money if a stock moves in a certain direction. These trades can range from bullish buy spreads (two-legged trades) to iron condors (four-legged trades) with dozens of possible combinations. While the trades are in the rights to buy and sell stocks, the full deployment of these trades can lead to gains and losses depending on whether the stock goes up, down, or stay in a range.

Highlights

  • According to Forbes “Why triple witchcraft always strikes a spell”.
  • Options trading affects stock prices. That’s a fact. What a lot of people don’t understand is that options are really all about intentions, and people who write, buy and sell options contracts have many different intentions. However, the sum of all option trades, regardless of intent, results in events that change stock prices. This is a very important thing to understand in the markets in general. A general point that is misunderstood by investors and traders is the impact that option contracts will have on various stocks.

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