1. Understanding Options

He who knows when he can fight and when he cannot, will be victorious

—Sun Tzu

Before trading options, you need to understand the nature of options. Unfortunately, some stock traders are not exactly clear on this—or on the distinctions between trading and investing. Before stock traders can transition to options trading, they first need to know what to expect as a trader.

What Is a Stock?

A stock is a fractional ownership in a company. It is an asset, a two-dimensional instrument easily represented by a single line on a chart where value goes up or goes down. Privileges such as voting rights and dividends come with that asset ownership. But is owning an asset the same thing as investment? The average person considers ...

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