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Duration: 8:25

Instructor:

Contributor: Interactive Brokers

Level: Beginner

Acquire an introductory understanding of the options market, by gaining basic product expertise, learning about risks and safeguards, pricing, trading strategies; obtain practical experience in the options market by constructing certain trades on an online platform and gain an understanding the benefits and critical risks faced by buyers and sellers in the options market.

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Study Notes:

While investing and trading in the options market may seem somewhat more daunting than other asset classes such as stocks, bonds, exchange-traded funds, currencies and commodities, you’ll ultimately find that their complexity can be boiled down to simple concepts you’ll be able to understand and use the more you’re exposed to, and have hands-on experience with the material.

Our aim is for you to acquire these skills, as well as the know-how, to invest and trade in these often-complex financial instruments.

For example, did you know that the value of an equity option is essentially derived from the future performance of a stock, exchange-traded fund, or similar product? This is the derivative nature of options.

But what exactly is an option, and how do they function as derivatives? Why would you, as an investor or trader, decide to use them?

We’ll cover factors such as these, as well as many others, and by the end of this module, you should have the basic language skills to enable you to:

  • Distinguish between call and put options,
  • Identify the components of an options contract on a trading platform,
  • Make certain decisions about what you are able to do in the options market as a contract writer or owner,
  • Read different stock options positions, and
  • Tell whether a given position is in- or out-of-the-money.

We’ll also present you with some of the benefits and critical risks you may face as an options investor or trader, depending on your financial conditions, investment objectives, or other requirements.

And we’ll also give you a broad overview of some of the institutions involved in the options market, including the Options Clearing Corporation – and how you can access its options disclosure document, which will provide you with a host of important insights, including margin requirements, tax considerations, and other topics.

As you progress through this module, you should start acquiring those basic building blocks of the options market that will help you advance to more nuanced features and complex trading strategies specific to this asset class.

Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Options Trading

Options involve risk and are not suitable for all investors. For more information read the “Characteristics and Risks of Standardized Options” also known as the options disclosure document (ODD). To receive a copy of the ODD call 312-542-6901 or click here. Multiple leg strategies, including spreads, will incur multiple commission charges.

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