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In this clip for Stocks in Translation, sponsored by tastytrade, Jessica Inskip, Director of Investor Research at Stockbrokers.com, joins Markets and Data Editor Jared Blikre to explain the basics of options.
Simply put, an option is a contract between a buyer and a seller. “The buyer is paying a premium for the rights to execute upon that contract. The seller receives that premium,’ explains Inskip.
Blikre and Inskip break down the key components of an option into four parts: quantity—one contract typically represents 100 shares; product—the security being traded; strike price—the agreed-upon price; and timeframe—the expiration date.
When considering calls and puts, it’s important to remember, “Anytime you hear the word long, just like with stock, we think purchased. Short, we think sold. Call, the right to buy. Put, the right to sell,” says Inskip.
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Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service.
This article was written by John Tejada.