Here’s an example of a standard quote on an option. The seller of the option contract has the obligation to take the opposite side of the trade if and when the owner exercises the right to buy or sell the asset. That period of time could be as short as a day or as long as a couple of years, depending on the option. Options are contracts giving the owner the right to buy or sell an asset at a fixed price (called the “ strike price”) for a specific period of time. So feel free to substitute these terms to match your preferred style of trading. Some of the most common ones are stocks, indexes, or ETFs (Exchange Traded Funds). Actually, options can be traded on several kinds of underlying securities. Throughout the site we talk about the “stock” that options are based on. Of course, if you’re a seasoned veteran or MVP, by all means skip right ahead to the option strategies. But how will you really know you know them unless you read this section? Therein lies the paradox. Some of you probably already know these terms and concepts, or at least think you do. Here are a few things you absolutely need to understand before this Playbook will make as much sense to you as we hope it will.
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