An option is a security that represents the right, but not the obligation, to buy or sell a specified amount of an underlying security (stock, bond, futures contract, etc.) at a specified price within a specified time.
You can think of options as “renting” 100 shares of stock – without ever buying the shares outright.
Options offer an amazing versatility that you can use in a variety of ways to profit from a rise or fall in the underlying market. They can provide you with that same kind of safety net for your investments and trades.
Call options let you profit from rising stocks, whereas put options let you profit from falling ones – all without risking any more money than you put in at the beginning. And in times of high market volatility, options are a welcome relief from the uncertainties of traditional investing methods
Unlike stock positions, you’re not limited by market direction either. Whether the market moves up, down, or sideways, there’s always a way for you to profit using options.
And maybe best of all, simply by adding options to your portfolio, you can quickly – and easily – create a potentially unlimited stream of income.
If you’re new to options, Andrew has some great resources to better your understanding:
Options 101 -walks you through everything you need to know to become a successful trader.