Option Traders’ Market Basic Terms Overview

Michael C. Thomsett

The realm of options is a highly specialized, intricate, and often-misunderstood market. The reputation of options as high risk is only partially deserved. In fact, you can find option products to suit any investment profile, from very high risk to very conservative. You can buy and sell options on stocks, futures, indexes, and even exchange-traded funds (ETFs).

Basics of Options—Standardized Terms

All listed options include standardized terms. These are the type of option (call or put), the underlying security on which options are bought or sold, the strike price, and the expiration date.

A Call Is the Right to Buy 100 Shares

A call is an intangible contract that grants its owner ...