Options

Options are derivative contracts traded on an exchange similar to a stock exchange. There are two main types of stock options; call options and put options.† Options provide holders the right to buy or sell a certain underlying stock at a certain price prior to a specific expiry date.† Holders do not have an obligation to exercise stock options.† Call option holders who wish to exercise their options are required to pay the agreed price for the issuance of shares.† Therefore, stock options are actually legal contracts which provide the owner the ability and right to buy and/or sell a specific quantity of stock at a specific price on or before a set date known as the expiry date.

Option investing can be extremely risky, however, in certain cases option strategies can be implemented which in fact reduce investor risk and provide investors with a better change of profit from equity investments.†

Individuals wishing to trade options are required to hold margin accounts with investment brokerage houses.† It is important to note that not advisors are allowed to trade options.† Certain courses and licensing is required to be able to trade in options and futures contracts.†

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