OPTIONS TRADING: 2 BOOKS IN 1. OPTIONS TRADING CRASH COURSE + OPTIONS TRADING STRATEGIES. OPTIONS, FOREX, STOCKS, DAY TRADING, SWING TRADING, BUT ALSO DEMOS, CHARTING, AND TECHNICAL ANALYSIS by Benjamin Kratter

OPTIONS TRADING: 2 BOOKS IN 1. OPTIONS TRADING CRASH COURSE + OPTIONS TRADING STRATEGIES. OPTIONS, FOREX, STOCKS, DAY TRADING, SWING TRADING, BUT ALSO DEMOS, CHARTING, AND TECHNICAL ANALYSIS by Benjamin Kratter

CHAPTER 1
What are Options?

A
CHAPTER 1
What are Options?
An option is basically an agreement on the underlying shares of
stock. It is an agreement to exchange shares at a fixed price over
a certain timeframe (they can be bought or sold). The first thing
that you should understand about options is the following. Why would
someone get involved with the options trading in the first place? Most
people come to options trading with the hope of earning profits from
trading the options themselves. To truly understand what you are doing, you
need to understand why options exist to begin with.
There are probably three main reasons that options on stocks exist. The first
reason is that it allows people that have shares of stock to earn money from
their investment in the form of regular income. So, it can be an alternative
to dividend income or even enhance dividend income. If you own a
minimum of 100 shares of some stock, this is a possibility. Then you can
sell options against the stock and earn income from that over time intervals
lasting from a week to a month, generally speaking. Obviously, such a
move entails some risk, but people will enter positions of that type when the
relative risk is low.
The second reason that people get involved with options is that they offer
insurance against a collapse of the stock. So, once again, an option involves
being able to trade shares of the stock at a fixed price that is set at the time
the contract is originated. One type of contract allows the buyer to purchase
shares, the other allows the buyer to sell shares. This allows people who
own large numbers of shares to purchase something that provides protection
of their investment that would allow them to sell the shares at a fixed price
if their stock was declining by huge amounts on the market. So, the concept
is exactly like paying insurance premiums. It is unclear how many people
actually use this in practice, but this is one of the reasons that options exist.
The way this would work would be that you pay someone a premium to
secure the right to sell them your stock at a fixed price over some time
frame. Then if the share price drops well below that degree to price, you
would still be able to sell your shares and avoid huge losses that were
occurring on the market. 
The third reason that I would give for the existence of options is that it
provides a way for people to decide to purchase shares of stock at the prices
that they find attractive, which are not necessarily available on the market.
So, there is a degree of speculation here. But let us just say that a particular
stock you are interested in is trading at $100 a share.  Furthermore, let us
assume that people are extremely bullish on the stock, and they are

OPTIONS TRADING: 2 BOOKS IN 1. OPTIONS TRADING CRASH COURSE + OPTIONS TRADING STRATEGIES. OPTIONS, FOREX, STOCKS, DAY TRADING, SWING TRADING, BUT ALSO DEMOS, CHARTING, AND TECHNICAL ANALYSIS by Benjamin Kratter