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Introduction to Options

This course is reproduced with the permission of XPRESSTRADE Back to Trading 101 Index


The foregoing is, at most, a brief and incomplete discussion of a complex topic. Option trading has its own vocabulary and its own arithmetic. If you wish to consider trading in options on futures contracts, you should discuss the possibility with your broker and read and thoroughly understand the Options Disclosure Document which the broker is required to provide with your account application. In addition, have your broker provide you with educational and other literature prepared by the exchanges on which options are traded. Or, contact the exchange directly -- most futures exchanges ordinarily make a number of excellent publications available. In no way, it should be emphasized, should anything discussed herein be considered trading advice or recommendations. That should be provided by your broker or advisor, or if you're a self-directed trader, your decisions should be made after carefully studying the principles of options and after carefully analyzing the market you intend to trade. In closing, here's a quick reminder of what happens to the buyer and seller of options when options are exercised:

After Exercise

Call Option

Put Option

Buyer assumes

Long futures position

Short futures position

Seller assumes

Short futures position

Long futures position

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