The Listed Option
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The first step in becoming an effective option player is to
gain a complete understanding of the focal point of the game—
the listed option. A listed option is a stock option (remember,
think futures, too), and an option is simply a contract, one that
gives you the right to buy or sell 100 shares of stock at a specific
price for a specific period of time. While stock options have been
with us for a long time, the brilliant idea of creating a listed option
opened up a whole new investment medium.
As a result, listed options are stock options that are liquid,
standardized and continually created at the changing price levels
of the common stock. When we say a listed option is liquid, we
mean that it can be bought and sold at any time in an auction
market similar to the New York Stock Exchange.
Formerly in the old over-the-counter (OTC) market, if you
could find a seller, stock options could be purchased, but in order
to have taken your profits from that option, you would have had
to exercise the option, actually buying the 100 shares of the stock
that you had the right to purchase. Now with the options exchanges
this costly process of actually buying the stock or selling
the stock is not necessary. All you have to do is go back to the Exchange
and sell your option.
The first step in becoming an effective option player is to
gain a complete understanding of the focal point of the game—
the listed option. A listed option is a stock option (remember,
think futures, too), and an option is simply a contract, one that
gives you the right to buy or sell 100 shares of stock at a specific
price for a specific period of time. While stock options have been
with us for a long time, the brilliant idea of creating a listed option
opened up a whole new investment medium.
As a result, listed options are stock options that are liquid,
standardized and continually created at the changing price levels
of the common stock. When we say a listed option is liquid, we
mean that it can be bought and sold at any time in an auction
market similar to the New York Stock Exchange.
Formerly in the old over-the-counter (OTC) market, if you
could find a seller, stock options could be purchased, but in order
to have taken your profits from that option, you would have had
to exercise the option, actually buying the 100 shares of the stock
that you had the right to purchase. Now with the options exchanges
this costly process of actually buying the stock or selling
the stock is not necessary. All you have to do is go back to the Exchange
and sell your option.