Trading Difference Between stock and option trading
There is much difference between stock and option trading. Understanding these discrepancies can make the difference between making money and losing money in the options market, so it’s a good idea to have a grasp of them before putting money in an options trade.
An option is a contract that gives the buyer of the option the right, but not the obligation to buy or sell an asset at a predetermined price on or before a predetermined price. A call option gives the individual the right to buy the asset, while a put option gives the right to sell the asset.
Stocks sell a wide variety of prices, but options only sell at predetermined prices, which are known as the strike price. These strike prices are the agreed-upon purchase or sale prices and are fixed amounts that are set according to the value of the underlying asset. Mostly, Stocks between 5 and 25 have strike prices in increments of 2.50. Stocks between 25 and 200 have strike prices in increments of 5. Scripts that sell for more than 200 have strike prices in increments of 10. Continue reading “Difference between stock and option trading”