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American Style Stock Options


      By www.options-trading-education.com
Trading American style stock
  options is not a matter of
 Americans being patriotic.


http://www.options-trading-education.com/7064/american-style-stock-options/
It is a matter of adding value to
    the options that you buy.



  http://www.options-trading-education.com/7064/american-style-stock-options/
The extra value of American
    style stock options over
European style stock options is
that one can execute American
style stock options at any time
  during the contract period.

  http://www.options-trading-education.com/7064/american-style-stock-options/
In both American and European
    style options trading, one
 purchases or sells puts or calls,


  http://www.options-trading-education.com/7064/american-style-stock-options/
employs fundamental analysis
  of the underlying stock, and
assesses market sentiment with
     technical trading tools.


  http://www.options-trading-education.com/7064/american-style-stock-options/
American style stock options are
available on markets outside of
   the United States as well.


  http://www.options-trading-education.com/7064/american-style-stock-options/
There are, in fact, a number of
   types of options styles:



 http://www.options-trading-education.com/7064/american-style-stock-options/
American: can be exercised on
any trading day until expiration



  http://www.options-trading-education.com/7064/american-style-stock-options/
Asian: payment is based on
average underlying price over a
     stated period of time


  http://www.options-trading-education.com/7064/american-style-stock-options/
Barrier: the price of the
underlying must rise or fall past
a given barrier before exercise is
             allowed


  http://www.options-trading-education.com/7064/american-style-stock-options/
Binary: payment is all of nothing
 depending on the terms of the
           contract


  http://www.options-trading-education.com/7064/american-style-stock-options/
Bermudan: can be exercised
only on specific dates up until
          expiration


 http://www.options-trading-education.com/7064/american-style-stock-options/
European: can only be exercised
        on expiration



  http://www.options-trading-education.com/7064/american-style-stock-options/
Exotic: generally refers to
 options based on complex
    financial structures


http://www.options-trading-education.com/7064/american-style-stock-options/
Vanilla: simply means that the
      option is not exotic



 http://www.options-trading-education.com/7064/american-style-stock-options/
Trading American Style Stock
          Options



 http://www.options-trading-education.com/7064/american-style-stock-options/
Many beginning traders limit
themselves to purchasing either
    calls or puts on stocks.


  http://www.options-trading-education.com/7064/american-style-stock-options/
The trader pays for the right to
buy in the case of a call or sell in
        the case of a put.


  http://www.options-trading-education.com/7064/american-style-stock-options/
The worst that a trader can do
in either case is lose the price of
           the contract.


  http://www.options-trading-education.com/7064/american-style-stock-options/
The best that a trader can do is
to execute or exit the contract
    at the optimum time.


  http://www.options-trading-education.com/7064/american-style-stock-options/
In both American style options
  trading and European style
  options trading a trader can
 simply sell the contact for its
        current value.

 http://www.options-trading-education.com/7064/american-style-stock-options/
This value obviously rises with
price of the underlying in a call
contract and rises with the fall
   of the underlying in a put
            contract.

  http://www.options-trading-education.com/7064/american-style-stock-options/
But, what if the trader wants to
  take possession the stock?



  http://www.options-trading-education.com/7064/american-style-stock-options/
This happens with investors
who see an opportunity to get
  into a stock a good price.


 http://www.options-trading-education.com/7064/american-style-stock-options/
The investor can execute the
  contract in an American style
contract and then purchase puts
 on the stock in order to protect
           his position.

  http://www.options-trading-education.com/7064/american-style-stock-options/
This feature is not available in
   European style options.



 http://www.options-trading-education.com/7064/american-style-stock-options/
Likewise in a put contract an
investor may have a stock that
       has risen rapidly.


 http://www.options-trading-education.com/7064/american-style-stock-options/
He may want to protect himself
  against a fall in stock price.



  http://www.options-trading-education.com/7064/american-style-stock-options/
Using American style stock
 options he can get out of the
stock when it falls and still sell
     at the original price,


 http://www.options-trading-education.com/7064/american-style-stock-options/
called the strike price, and not
 have to wait with his money
tied up until expiration of the
       options contract.


 http://www.options-trading-education.com/7064/american-style-stock-options/
The fact that European style
  options limit execution of
options trades can be a major
factor in which style to trade.


 http://www.options-trading-education.com/7064/american-style-stock-options/
Which Is the Way to Go?




http://www.options-trading-education.com/7064/american-style-stock-options/
The most important factors in
options trading are the same as
   in trading stocks directly.


  http://www.options-trading-education.com/7064/american-style-stock-options/
Know or learn the fundamentals
  and follow the market with
     technical indicators.


  http://www.options-trading-education.com/7064/american-style-stock-options/
Stick with practical options
      trading tactics.



http://www.options-trading-education.com/7064/american-style-stock-options/
If the inability to execute an
    options contract midway
 through the contract period is
important, avoid European style
 and stick with American style
          stock options.

  http://www.options-trading-education.com/7064/american-style-stock-options/
Otherwise, simply exit your
position at the most profitable
  moment by executing the
        opposite trade.



 http://www.options-trading-education.com/7064/american-style-stock-options/

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American Style Stock Options

  • 1. American Style Stock Options By www.options-trading-education.com
  • 2. Trading American style stock options is not a matter of Americans being patriotic. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 3. It is a matter of adding value to the options that you buy. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 4. The extra value of American style stock options over European style stock options is that one can execute American style stock options at any time during the contract period. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 5. In both American and European style options trading, one purchases or sells puts or calls, http://www.options-trading-education.com/7064/american-style-stock-options/
  • 6. employs fundamental analysis of the underlying stock, and assesses market sentiment with technical trading tools. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 7. American style stock options are available on markets outside of the United States as well. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 8. There are, in fact, a number of types of options styles: http://www.options-trading-education.com/7064/american-style-stock-options/
  • 9. American: can be exercised on any trading day until expiration http://www.options-trading-education.com/7064/american-style-stock-options/
  • 10. Asian: payment is based on average underlying price over a stated period of time http://www.options-trading-education.com/7064/american-style-stock-options/
  • 11. Barrier: the price of the underlying must rise or fall past a given barrier before exercise is allowed http://www.options-trading-education.com/7064/american-style-stock-options/
  • 12. Binary: payment is all of nothing depending on the terms of the contract http://www.options-trading-education.com/7064/american-style-stock-options/
  • 13. Bermudan: can be exercised only on specific dates up until expiration http://www.options-trading-education.com/7064/american-style-stock-options/
  • 14. European: can only be exercised on expiration http://www.options-trading-education.com/7064/american-style-stock-options/
  • 15. Exotic: generally refers to options based on complex financial structures http://www.options-trading-education.com/7064/american-style-stock-options/
  • 16. Vanilla: simply means that the option is not exotic http://www.options-trading-education.com/7064/american-style-stock-options/
  • 17. Trading American Style Stock Options http://www.options-trading-education.com/7064/american-style-stock-options/
  • 18. Many beginning traders limit themselves to purchasing either calls or puts on stocks. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 19. The trader pays for the right to buy in the case of a call or sell in the case of a put. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 20. The worst that a trader can do in either case is lose the price of the contract. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 21. The best that a trader can do is to execute or exit the contract at the optimum time. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 22. In both American style options trading and European style options trading a trader can simply sell the contact for its current value. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 23. This value obviously rises with price of the underlying in a call contract and rises with the fall of the underlying in a put contract. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 24. But, what if the trader wants to take possession the stock? http://www.options-trading-education.com/7064/american-style-stock-options/
  • 25. This happens with investors who see an opportunity to get into a stock a good price. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 26. The investor can execute the contract in an American style contract and then purchase puts on the stock in order to protect his position. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 27. This feature is not available in European style options. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 28. Likewise in a put contract an investor may have a stock that has risen rapidly. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 29. He may want to protect himself against a fall in stock price. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 30. Using American style stock options he can get out of the stock when it falls and still sell at the original price, http://www.options-trading-education.com/7064/american-style-stock-options/
  • 31. called the strike price, and not have to wait with his money tied up until expiration of the options contract. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 32. The fact that European style options limit execution of options trades can be a major factor in which style to trade. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 33. Which Is the Way to Go? http://www.options-trading-education.com/7064/american-style-stock-options/
  • 34. The most important factors in options trading are the same as in trading stocks directly. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 35. Know or learn the fundamentals and follow the market with technical indicators. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 36. Stick with practical options trading tactics. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 37. If the inability to execute an options contract midway through the contract period is important, avoid European style and stick with American style stock options. http://www.options-trading-education.com/7064/american-style-stock-options/
  • 38. Otherwise, simply exit your position at the most profitable moment by executing the opposite trade. http://www.options-trading-education.com/7064/american-style-stock-options/