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Option approval level 4 involves the sale of short calls and short puts, which are options sold on margin where the potential settlement cost is unlimited.
Options trading is how investors can speculate on the future direction of the overall stock market or individual securities, like stocks or bonds. Options contracts give you the choicebut not the obligationto buy or sell an underlying asset at a specified price by a specified date.
Selling options can help generate income in which they get paid the option premium upfront and hope the option expires worthless. Option sellers benefit as time passes and the option declines in value; in this way, the seller can book an offsetting trade at a lower premium.
The most profitable options strategy is to sell out-of-the-money put and call options. This trading strategy enables you to collect large amounts of option premium while also reducing your risk. Traders that implement this strategy can make ~40% annual returns.
Types of options based on Expiration Cycle Regular Options: These options have a standard expiration cycle. Weekly Options: This option type has a much shorter expiration date and they are also known as weeklies. Quarterly Options: These are also known as quarterlies.
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Options are derivatives of financial securitiestheir value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.
There are four basic options positions: buying a call option, selling a call option, buying a put option, and selling a put option. With call options, the buyer is betting that the market price of an underlying asset will exceed a predetermined price, called the strike price, while the seller is betting it wont.
The reason for selling a call option is also the same: To profit by keeping the premium you charge for the contract. Quick tip: Its important to remember that when you sell a call option, your potential upside (profit) can be limited to the premium you receive and your downside can be unlimited.
There are two types of options: calls and puts. American-style options can be exercised at any time prior to their expiration. European-style options can only be exercised on the expiration date.
Types of options based on Expiration Cycle Regular Options: These options have a standard expiration cycle. Weekly Options: This option type has a much shorter expiration date and they are also known as weeklies. Quarterly Options: These are also known as quarterlies.

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