Chapter 5: The mechanics: how to buy, sell and exercise options
In this chapter we will look at the mechanics of trading options, how to open a position and how you can then close your open position if you wish to. We will also look at how you sell options and the margin requirements that are attached to selling options.
Towards the end of this chapter we discuss the additional documentation requirements you need to complete to trade options with your broker and how this may affect the option strategies your broker will allow you to undertake with them. Our last topic is market makers. We discuss who they are and what they do.
Opening a position
As we outlined in chapter 1, you must specify or select the four standard terms of your option ...
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