Chapter 12

Options: The Right to Buy or Sell at a Fixed Price

IN THIS CHAPTER

Bullet Understanding the specifics of options

Bullet Feeling comfortable with an options chart

Bullet Calculating the maximum loss, maximum gain, and break-even points

Bullet Dealing with unconventional options

Bullet Covering additional option rules

Welcome to the wonderful world of options. I’m sure you’ve heard stories about the difficulty of options. Put your mind at ease — I’m here to make your life easier. Maybe I’m a little warped, but options are my favorite part of the Series 7 exam! Options are considered derivative securities because their value is derived from the value of the underlying stock, index, currency, and so on. Options are one of the more heavily tested areas on the Series 7. Options can be trades on individual stocks, stock market indexes, foreign currency, interest rates, or bonds. And options can be traded on exchanges such as the Chicago Board Options Exchange (CBOE).

Some option info was already covered when taking ...

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