Steps To Follow While Options Trading

62.58 billion. That's the total number of futures and options contracts traded globally in 2021, according to data released by the FIA (Futures Industry Association). That's up 33.7% from 2020. Last year was the fourth year the “global exchange-traded derivatives markets set a record above the prior year in terms of total trading activity.” 

What Are Options Contracts?

Trading options involve purchasing and selling an underlying asset at a pre-determined price by a specified future date. 

Open an Options Trading Account

If you want to trade options, you must have an options trading account. Compared to a simple brokerage account for stock trading, an options trading account usually requires greater capital involvement. 

Select The Options Contract

After successfully opening the options trading account, you must decide on the type of options contract you want to enter.  

Predict The Strike Price

An option contract is valuable only if the underlying stock price closes the option's expiration period “in the money,” i.e., either above or below the strike price. (Above for call options and below for put options.)  

Predict The Option Time Frame

All options contracts have an expiry date, ranging from days to months to years. This period, too, cannot be conjured up from thin air.  

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