Frequently Asked Questions: Raging Bull
Do you want to learn more about trading? See one of our frequently asked questions to learn more!
What Is A Stock Option?
A stock option is representative of a contract that an investor creates, outlining his right to purchase or sell a stock. The option includes a specific price, and a date that signifies the expiration of the contract. With a stock option, an investor has the right to purchase or sell a stock at the price listed on the option, until the expiration date. The advantage of a certain types of options is that the investor is not required to follow through with the transaction, and can decide against it.
What Is The Difference Between Options Trading And Stock Trading?
With options trading, you get to control contracts (blocks of 100) of a specific stock without having to actually own the underlying stock. With regular stock trading you must physically trade the actual stock itself.
What Is A Put Option?
A put option, on the other hand, would normally be where the trader believes that the price of a specific stock will fall to a certain price by a certain date and gives the trader the right but not the obligation to sell the stock at a specific price by the option’s expiry date.
By trading calls or puts, an investor is hoping that the difference in the price they purchased the call or the put at will either increase (in the case of calls) or decrease (in the case of puts) by the option expiry date. The difference between the buying and the selling price is what the trader hopes will create a profit for them.
What Are The Benefits Of Options Trading?
There are a few benefits to options trading. A person does not have to invest a lot of money in options trading, making it a great approach for traders wishing to invest in a company without having to actually own the underlying stock. Another benefit that attracts people to options trading is that when executed correctly your risk is limited to whatever amount was put into the options trade.
What Is A Call Option?
If a person believes that a certain stock will increase in price before the option’s contract expiry date, they would generally trade a call option. A call gives the trader the right, but not the obligation, to buy a stock at a certain price by a specific date.
What Are Common Strategies That Are Used For Options Trading?
There are numerous strategies that can be implemented with options trading. The strategy that a person chooses is dependent on their skill level and understanding of options trading. The most commonly used strategies include buying calls or puts, but it is possible for an experienced options trader to both buy calls or puts individually or combined (known as an options “spread”), or trade in calls or pots while simultaneously trading the underlying stock itself to act as a type of “insurance” should the trader be incorrect in their initial assessment of which way the option is likely to move.
Trading options effectively requires the trader to have a complete understanding of the risks involved as well as the potential, and a solid grounding in options trading, preferably with a trading mentor or tutor, should be considered mandatory.
What are the benefits of stock trading?
While stock trading can be more difficult when one is new to the stock market, but it also has several benefits that make it a great option for investing. With that being said, one of the biggest benefits of stock trading is the diversity that the stock market provides. If a person wants to invest their money into a variety of industries, they would have the option through the stock market.
Another benefit of stock trading is the stability it can provide with the right strategy and approach. In general, the stock market sees a progressive increase in value, which provides the potential to make money through investments. It remains important to be aware of any changes with individual stocks that you may have invested in.
What resources can I use to learn more about trading?
Depending on your level of knowledge on trading, there are a few resources that can help you achieve success. Beginners should take the time to do research into trading, especially if they are thinking about investing in the future. There are several educational and training programs on trading, including RagingBull.com. Through these online programs, you get access to resources from some of the industry’s biggest names, including Jeff Bishop and Jason Bond.
For those who have a basic understanding of trading, there are several options that you can use to learn more about trading. For most traders, a good start would be to open a broker account using one of the websites recommended by StockBrokers.com. Setting up an online account can help you take the first step in trading. Most online stock will also include free resources for you as you begin to invest more money.
What are momentum stocks?
Momentum trading generally refers to the rate of acceleration at which a stock is moving at, whether it be in a positive or negative direction. In other words, momentum trading can initiated based on the existing trends in the stock market at that time, and the direction that stocks are going. When stocks experience momentum, it is common for some traders to try and complete a transaction in order to get the largest return on investment. It is important to note that momentum trading requires a strong, well-built strategy. Those who are new to the stock market may not want to begin with momentum trading.
What Are Penny Stocks?
Penny stocks refer to stocks that are list as $5 or under in value within the stock market. Pennys stocks have become popular in recent years, thanks to its affordable price point and seemingly lower risk approach to trading. In general, penny stocks are most commonly used by smaller public companies, and tend to experience significant fluctuation. Because of their relatively cheap price point, penny stocks can experience as much as a 50% fluctuation within a 24-hour period, making them much less stable than higher priced stocks.