options trading, page-26

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    Raine

    I do not trade options but in general they simply involve making a call on the direction of the market or a share.

    Is the share price going to go up or is it going to fall?

    If you think the share price is going to fall then you either buy a put option in that stock or write (sell) a call option.

    If you think the share price is going to rise then you either buy a call option in that stock or write (sell) a put option.

    In writing (selling) options you have the problem of closing them out if you pick the wrong direction.

    If the option is not closed out then you are liable to buy shares from or supply shares to the other party (which may cost you tens or hundreds of thousands of dollars).

    In short, you really need to understand markets and when shares are undervalued or overvalued.

    That is all I can offer.
 
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