Buying and Selling Options

Now that we have discussed some more options terminology, let’s get back to trading options. We now know that we are able to trade in the options like any other instrument and that there are two kinds of options – Calls and Puts – and both of them can either be bought or sold. Plus, we can also trade in the underlying markets directly, therefore we have six possible actions that we can take when trading:

1. We can BUY a CALL option

2. We can SELL a CALL option

3. We can BUY a PUT option

4. We can SELL a PUT option

5. We can BUY the FUTURES

6. We can SELL the FUTURES


Note:

The term LONG and SHORT (for buy and sell) are frequently used to describe our actions instead of using “Buy” and “Sell” – but they are used intermittently – just try to get used to this – LONG = BUY and SHORT = SELL.

In our next lesson, we will discuss what will happen to you if you hold an option on the last day – the expiry day – of the option.