Chapter 1Introduction to Options

This book is concerned with making money from the financial markets. If you pick up just one thing from it that you use successfully for the rest of your life, it will be worth it. And I believe you will.

During this chapter I provide a basic overview of options and set the basic foundations that you will need for the chapters ahead.

Definition of an Option

An option conveys the right, not the obligation, to buy (or sell) an asset at a fixed price before a predetermined date.

Here are the salient components of that definition:

• the right, not the obligation

• to buy or sell an asset

• at a fixed price

• before a predetermined date

These components play important roles in the valuation of an option. Remember ...

Get Volatile Markets Made Easy: Trading Stocks and Options for Increased Profits now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.