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A futures contract is an agreement to buy or sell on date A, quantity B of stock C for price per share D. When date A comes around, you must buy the stock for that price.
How this can backfire on you is pretty easy to understand. You bought a futures contract to buy 10,000 shares of GM for $30 per share on June 1, 2009. On June 1, 2009, GM declared bankruptcy and its stock closed at 75 cents per share. An instant loss of $29.25 per share (or $292,500 on the whole deal) is enough to forever discourage anyone from trading in stock futures. Futures have a purpose in life--stabilizing the price of commodities for their users--but stock trading isn't one of those purposes.
Options are different: they are like futures but you have the right, not the obligation, to complete the transaction. If you had bought a GM "call" option, you would have the right to buy GM at $30 on June 1. When GM went into the toilet you just wouldn't have exercised the contract. You can also deal in put options, which give their buyers the right to sell stock at a certain price. Puts are often used as insurance policies: if you have a stock you don't trust, you buy a put at the lowest price you want it to fall to. If it DOES fall below that price, you're rid of it.
What else can I help you with?
What are the differences between a stock grant and a stock option?
A stock grant is when an employer gives you company stock outright, while a stock option is the right to buy company stock at a set price in the future.
What is the strategy for using a put option short in the stock market?
The strategy for using a put option short in the stock market involves selling a put option contract with the expectation that the stock price will decrease. If the stock price falls below the strike price of the put option, the seller profits from the difference. This strategy is used to benefit from a bearish outlook on a stock.
What is the most effective option strategy for maximizing profits in the stock market?
The most effective option strategy for maximizing profits in the stock market is the long call option strategy. This strategy involves buying a call option on a stock with the expectation that the stock price will rise significantly. If the stock price increases, the call option will also increase in value, allowing the investor to profit from the price movement.
What does it mean to buy a put option in the stock market?
Buying a put option in the stock market gives the investor the right to sell a specific stock at a predetermined price within a certain time frame. This can be used as a way to profit from a decline in the stock's price.
Will SIVB stock trade again in the future?
It is likely that SIVB stock will trade again in the future, as long as the company remains in operation and the stock market continues to function.
Where can I learn about stock option research?
Stock Option Research (SOR) is when you analyze the stock market before you make a bid or buy a stock. This can be useful for getting money from the stock market, and you can look around online for good tips.
What is the option to sell stock at a specified time in the future called?
A Put option
Use future in a sentence?
It can be difficult to predict what the stock market will do in the future.
What do you see for the stock market future?
I see success in the stock market future. I stay informed of this information by reads the newspaper and checking appropriate websites on this matter.
What are the differences between a stock grant and a stock option?
A stock grant is when an employer gives you company stock outright, while a stock option is the right to buy company stock at a set price in the future.
What is the strategy for using a put option short in the stock market?
The strategy for using a put option short in the stock market involves selling a put option contract with the expectation that the stock price will decrease. If the stock price falls below the strike price of the put option, the seller profits from the difference. This strategy is used to benefit from a bearish outlook on a stock.
What are restricted stock options?
Restricted stock options are usually granted by employers to executives as a means of compensation. A stock option itself, is the right to purchase shares in the business for an agreed upon price (determined by market value at the time of the option's issuance) regardless of future price values. A restricted stock option is true to it's namesake; it is restricted in that the option will never allow for the purchase of stock at lower than 85% of the current value of the stock being purchased.
What is the most effective option strategy for maximizing profits in the stock market?
The most effective option strategy for maximizing profits in the stock market is the long call option strategy. This strategy involves buying a call option on a stock with the expectation that the stock price will rise significantly. If the stock price increases, the call option will also increase in value, allowing the investor to profit from the price movement.
What is excersing a option?
Exercising an option means exercising your rights to buy or sell the underlying asset in accordance to the parameters of the option. When you exercise a call option, you will get to buy the underlying stock at the strike price no matter what price the stock is trading at in the market. When you exercise a put option, you will get to sell the underlying stock at the strike price no matter what price the stock is selling at in the market. In both cases, the option you own disappears from your account.
What is a stock option tutorial?
A stock option tutorial is an online program, or a seminar that one can take, which is going to teach them which options to purchase in the market .
What does it mean to buy a put option in the stock market?
Buying a put option in the stock market gives the investor the right to sell a specific stock at a predetermined price within a certain time frame. This can be used as a way to profit from a decline in the stock's price.
Where can I learn about stock option administration?
Stock Option Administration are contracts that a lawyer would prepare for you when you are investing in the stock market. You can find information about these at salary.com and other various websites.
