Option trading rules

Someone, using their potential, realizes that Forex is not for him, but someone, having understood all the nuances of trading in the market and taking control of their feelings, continues to move on, earning good money. If you are confident in your knowledge in the financial and economic fields, then you can move on to a new, higher level, which is options trading. Translated from English, the word option means a choice, that is, a trader who buys an option has the right to choose to exercise it or not.
In other words, option trading allows a trader to sell or buy an underlying asset, which can be currency, commodities, stocks, etc., at a predetermined price and within a specified time frame.

Option trading rules

Do not forget that in order to get the right to trade options, you need to open an account in some dealing center, broker or commercial bank, which allows its clients to trade on the international financial market. There are many options, but let's look at one that gives the right to sell or buy at any time, with an expiration date and several parameters.
For example, for $ 50 we buy a Call option for gold, which expires in 6 months and has a strike of 1600. Based on this, it becomes clear that for $ 50 we bought the right to purchase gold in 6 months at 1600. Let's say this time the gold price reached 2000, so we buy at 1600 + 50 dollars, it turns out, we pay 1650 dollars, and sell for 2000, while earning 350 dollars. And let's not forget that by purchasing an option, we acquire a right, not an obligation, so if the price turns out to be at the level of $ 1,500, we can abandon the transaction, losing only $ 50.
There are two types of options: Put and Call.

Put is an option that allows you to sell the underlying asset at a specified price. It should only be purchased when the price of the underlying asset is expected to decline.

Call is an option that gives the trader the right to buy the underlying asset at a specified time and at a specified price in advance. It should be used only when the trader is confident that the price will certainly rise.
These two instruments are essential for option trading.

Today, option trading is a fairly broad concept, with a huge variety of them. The most popular are European and American options.
FX24

Author’s Posts