Two Kinds of Options

Stock options cost less than stock so they provide a high leverage approach to trading. This can considerably limit the overall risk of a trade or provide extra income. In general, option buyers have rights and option sellers have responsibility. There are two kinds of options: calls and puts.
Call options give you the right to buy the underlying asset. Put options give you the right to sell the underlying asset. You should become familiar with the inner workings of both options before you attempt any trading. All of the strategies you learn from this point on depends on your total understanding of these two kinds of options.
Your risk is limited to the price of the option so there are no margin requirements if you want to buy. You should be familiar with the select terminology of the option market in order to trade successfully. A stock option expires by close of business on the 3rd Friday of the expiration month. The price of an option is known as the premium and the option’s premium is determined by: the current price of the underlying asset, the strike price of the option, the time remaining until expiration, and volatility. The most versatile trading instrument ever invented is the stock option.