Options Defined by
Options & Probability Expert Don Fishback:
A stock option is a derivative financial instrument that gets its value from the underlying stock on which options contracts are based.
For example: Amazon (AMZN) options get their value from AMZN stock. Disney (DIS) options get their value from DIS stock.
Option buyers have the right but not the obligation to purchase or sell shares of the underlying stock at a specified price called the strike price within a specified period of time, called the expiration.
Option sellers receive money from option buyers because they take on the obligation to buy or sell shares of the underlying asset at the specified price within the specified time if the buyer chooses to exercise the right they have purchased.
For more detail, watch the 17 minute FREE video below where Don's hand picked investment coach, Bryan Strain, teaches you how options work.
"It's a way to control a lot more stock for a very limited amount of money.
It allows you to start off with a small amount of money and still make very good returns dollarwise."
Benefits of Trading Stock Options
Contrary to popular belief, buying options carries much less risk than owning stock.
Get Started With Less
Options are a fraction of the cost of owning the stock, yet they can have similar return. This allows you to start investing with less money.
Keep Up With Competition
Options are growing in popularity, if you don’t use them to your advantage, you may not be able to keep up with your competition.
If you buy 100 shares of a $100 stock you risk $10,000 and the stock must go to $200 for a 100% gain.
If you buy one call option at the 100 strike for $100. The stock needs only to finish at 102 for a 100% gain.
And the $9,900 you left in your account is safely earning interest.
Unlimited Profit Potential
If you buy a call, you make money as the stock rises above the cost of the option. How high can a stock price go? There is no limit.
If you can think of a something the market will do in the future, there is an option strategy to profit if you are right.
Options can be used to provide insurance on your investments. You can buy insurance on your stock positions, the market as a whole, or on other option positions.
Use Options to Buy Stock
Smart Investors can use options to buy stock at a lower price than the open market.
Option Volume at the Options Clearing Corp. (OCC) has grown from 1.08 billion in 2004 to 4.42 billion in 2019. Over the same time period, the lower chart shows that the number of searches where people inquired “What are Options?”, quintupled.
OCC Option Volume in 2004
OCC Option Volume in 2019
The truth is, options are less risky than buying or selling stock. This is probably the number one myth about options. It is usually stated by folks that don't understand how options work. When people do understand options, they say things like this...
"Please tell Don that I really want to thank him and your team for allowing me the privilege to review this material.
I found it to not only be worthwhile of the time spent to review it--but I do feel very much more informed and educated and wanting more. It was like drinking from a fire hose as they say."