[...]... comes with the obligation to receive delivery of the commodity, bond, or other instrument by a specific date The sale of a futures contract comes with the obligation to deliver the commodity, bond, or other financial instrument to the buyer by a certain date The purchase of an option provides the right, but not an obligation, to buy (in the case of a call) or sell (for a put) the underlying asset The. .. daily on the evening news While the DJIA has evolved through the years, the information derived from it is essentially the 20 THE OPTIONS COURSE WORKBOOK same It gauges the stock prices of 30 U.S companies and reflects developments within the U.S economy The Dow is a price-weighted index in that the average prices of all 30 components are added together and one final average is computed Though not the best... the price of the assets Go short: To sell securities, options, or futures with the intent to profit from a drop in the price of the assets 8 THE OPTIONS COURSE WORKBOOK Investor: A person whose principal concern in the purchase of a security is the minimizing of long-term risk, compared to the speculator who is prepared to accept calculated risk in the hope of making better-thanaverage profits, or the. .. process Even so, there eventually comes a time when the trader will not be able to learn more until he or she trades with real capital Using a broker who gets a trade a good fill and is easy to work with is crucial for the long-term success of an options trader With the number of brokers available, don’t be afraid to change brokers if the one you start with isn’t working out 6 THE OPTIONS COURSE WORKBOOK... to an options position constructed so that the profitability of the position relies on the magnitude of the move—not the directional bias; it is relatively insensitive to the price movement of the underlying instruments A delta neutral trade is arranged by selecting a calculated ratio of short and long positions with a combined delta of zero Go long: To buy securities, options, or futures with the intent... and many of these are optionable This allows a trader to choose a direction for an entire sector, rather than just one stock within the group 12 What is the difference between a futures contract and an options contract? Answer: A futures contract is a promise to actually deliver or take delivery of the underlying commodity In contrast, the purchase of an option provides the right, but not the obligation,... based on a number of factors, including: Answer: The total number of outstanding shares; the value of the equity of the company (what it owns less what it owes); the earnings the company produces now and is expected The Big Picture 17 to produce in the future; and the demand for the shares of the company Discussion: Stock ownership is a way to participate in the growth of a company It has limited liability,... and reports value changes to the group as a whole A variety of indexes 24 THE OPTIONS COURSE WORKBOOK are tailored to reflect the performance of many different sectors of the marketplace, such as the S&P 500 ($SPX) or the New York Stock Exchange Composite Index ($NYA) While these indexes are used to gauge trends within the stock market, some indexes are designed to measure the price changes of specific... trading options, you need to focus on three important features of options: duration, direction, and magnitude If understood, the interrelation of these three issues can provide the edge needed to win at options trading There are, however, some steppingstones that need to be put in place before jumping headlong into the options game Following the suggestions in this book will enable you to gain the knowledge... where there is more possible reward, there is usually a higher degree of risk Even the most successful options traders often lose money in individual trades However, these traders have learned to limit their risk and have developed a sound plan that allows them to be patient and persistent Options Trading: A Primer 7 MEDIA ASSIGNMENT Learning to use the Internet to further your understanding of the . futures with the intent to profit from a rise in the price of the assets. Go short: To sell securities, options, or futures with the intent to profit from a drop in the price of the assets. Options. use the Internet to further your understanding of the market and options is a vital part of your trading education. The free Optionet- ics web site has a plethora of information. Mainly, take the. Refers to an options position constructed so that the prof- itability of the position relies on the magnitude of the move—not the di- rectional bias; it is relatively insensitive to the price movement