Learning About Calls Mention options these days and most people think of stock options, those highly desirable perks some companies offer their employees. For investors that are able to accurately predict price movements of a stock movement within a specific time frame, equity options may provide the opportunity to reap impressive gains without commenting the large amount of money needed to buy shares out right.
Options typically have a life span of three, six, or nine months.
An option giving investors the right to buy a stock at an agreed price known as a call, while an option giving you the right to sell a stock at an agreed price is known as call, while an option giving investors the right to buy a stock at an agreed price is reffered a put. With long options investors can manage the level of risk involved, because the premium plus commission fees are the most one can loose. While buying call options for a perticular company, the investor is expressing that he or she expects that the stock price will rise before reaching option s expiration date. The premium, or cost of this call option would be determined by the expiration date and the stock s volatility. If the stock price of XYZ falls instead of rising, you can take action before the option expires in an effort to reduce your losses.