Trading 'the right to buy (or sell) at a price on a date'. The distinctive property of profiting without calling direction, and three strategies — credit spread, covered call, straddle.
An option is a trade in "the right to buy (or sell) at a certain price on a certain date". That sounds complex, but the essence is easiest to grasp as trading "insurance".
By analogy with fire insurance —
| Fire insurance | An option |
|---|---|
| You pay a premium | You pay the option "premium" |
| If a fire occurs, you receive a payout | If price moves your way, you profit |
| If no fire, the premium is not returned | If price doesn't move, the premium is not returned |
| Insurer: receives premiums, bears the risk | Option seller: receives the premium, bears the risk |
So with options you can take the side of "buying insurance (paying the premium)" or "being the insurer (receiving the premium, bearing the risk)". Only a minority of the 98 catalogued methods touch options, but they have a property alien to all the rest.
How to Read
OANDA:USDJPY
How to Read
OANDA:USDJPY
The Esoteric Volumes · By Application
Capital, discipline, psychology. The chapters that sit behind technique describe the bone-work that keeps an operator in the market for years. Access requires a written application, reviewed by hand.