What is a stock?
A stock is ownership of a company. Each share of a stock represents a percentage of that ownership.
What is a long position?
A long position is the possession of a security (e.g. a stock, option, commodity, or currency) that exhibits the prospect of gaining value. In other words, a person who is long stock ABC expects the value of stock ABC to increase over time and will profit when it does.
What is a short position?
A short position is the possession of a security (e.g. a stock, option, commodity, or currency) that exhibits the prospect of losing value. In other words, a person who is short stock ABC expects the value of stock ABC to decrease over time and will profit when it does.
What is a stock option?
A stock option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price (i.e. strike price) on or before a certain date. An option, just like a stock or bond, is a security. It is also a binding contract with strictly defined terms and properties.
What is a call option?
A call option is a contract exhibit gives a buyer the right to buy an asset by a certain date. The buyer isn’t obligated to buy the asset, but has the choice, or OPTION, to purchase the asset, or to exercise the call option, if certain conditions are met. In contrast, the seller of a call option (known as the call writer) is obligated to sell the asset if the buyer chooses to exercise his rights.
What is a put option?
A put option is a contract that gives a buyer the right to sell an asset by a certain date. The buyer isn’t obligated to sell the asset, but has the choice, or OPTION, to sell the asset, or to exercise the put option, if certain conditions are met. In contrast, the seller of a put option (known as the put writer) is obligated to buy the asset if the buyer chooses to exercise his rights.
More to come...
