Once investors move on from basic equity trading, for purposes of seeking alpha, or leverage (investments that move up and down at a faster rate parallel to the market), it’s hard to get very far without making use of options. But where most companies only have one stock, and one price for that stock, dozens of options exist for each share with options available.
Options, in general, give you (hence the name) the option to buy or sell one share of a stock at a named price, whether or not that price is the market value of the security. Like futures, options also have an expiration, or execution, date. However, unlike the commodities futures, where a forgetful investor can suddenly find themselves drowning in a tanker-truck worth of orange juice, all an expiring option does is whatever it says it will do — for example, if you have an option agreement to buy 400 shares of Wal-Mart stock for $73 each at the end of August 2017, and you do not actively exercise it, it goes into expiration. Read more…
