CHAPTER 1
Option Basics
To understand and implement option strategies effectively, you need to understand not only how stocks and the equity markets work, but what options are, how they function, and what affects their value. The strategy discussions in this book assume you are already familiar with stocks and options, so to refresh you on the basics, we have constructed Chapters 1 and 2 as a review of listed equity options. If you are already familiar with options, you can begin reading about call writing in Chapter 3.
What Are Options?
An option is a contract representing the right, for a specified term, to buy or sell a specified security at a specified price. Like stock, they are also standardized so they can trade on formal securities exchanges ...
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