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Unlike other investments where risks may have no limit, options offer a known risk to buyers. An option buyer absolutely cannot lose more than the price of the option, the premium. Because the right to buy or sell the underlying security at a specific price expires worthless if the conditions for profitable exercise or sale of the contract are not met by the expiration date. An uncovered option seller, on the other hand, may face unlimited risk. business brokerage

Guaranteed Contract Performance

The Options Clearing Corporation (OCC) guarantees that the terms of an option contract will be honored. Prior to the existence of options exchanges and OCC, an option holder who wanted to exercise an option depended on the ethical and financial integrity of the writer or his brokerage firm for performance. Furthermore, there was no convenient means of closing out one position prior to the expiration of the contract. forex broker

OCC, as the common clearing entity for all SEC-regulated option transactions, resolves these difficulties. Once OCC is satisfied that there are matching orders from a buyer and seller, it severs the link between the parties. In effect, OCC becomes the buyer to the seller and the seller to the buyer, thereby guaranteeing contract performance. As a result, the seller can buy back the same option he has written, closing out the initial transaction and terminating his obligation to deliver the underlying stock or exercise value of the option to the OCC, and this will in no way affect the right of the original buyer to sell, hold or exercise his option. All premium and settlement payments are made to and paid by the OCC. online brokerage

Further details of Options Trading

• Options expire on the Saturday following the third Friday of the expiration month, although the third Friday is the last day of trading. real estate broker

• Option trades have a one-day settlement. The trade settles on the next business day after the trade. Purchases must be paid for in full, and the proceeds from sales are credited to accounts on the settlement day. Some brokerage firms require settlement on the same day as the trade, when trade occurs on the last trading day of an expiration series. agency brokerage spark

• Options are opened for trading in rotation. When the underlying stock opens for trading on any exchange, regional or national, the options on that stock then go into opening rotation on the corresponding option exchange. The rotation system also applies if the underlying stock halts trading and then reopens during a trading day; options on that stock reopen via a rotation. business broker

• When the underlying stock splits or pays a stock dividend, terms of its options are adjusted. Such an adjustment may result in fractional striking prices and in options for other than 100 shares per contract. brokerage account

Options Basics /nobr No statement herein should be construed as a recommendation to purchase or sell a security, provide investment advice, or endorse an investment strategy. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies may be obtained from your broker or from an exchange. A prospectus, which discusses the role of The Options Clearing Corporation, is available upon request from The Options Clearing Corporation, One North Wacker Dr., Suite 500, Chicago, IL 60606 (1-800-678-4667). CAN SLIM Select HOW TO INVEST Financial Dictionary Investor s Corner Learning Center Lessons On Buying Lessons On Selling Cutting Losses Taking Profits Selling Indicators How to Sell -- A Checklist The CAN SLIM Investment Research Tool

Course II -- How To Sell Stocks To Maximize Your Profits Introduction Buying a stock is only half of the equation. Knowing when to sell is just as important. The first part of this course discusses why it s critical to cut your losses early. The second and third lessons teach you how to spot the best time to sell and take your profits, including ways to use stock charts to detect a weakening stock. stock broker

These lessons are based on decades of research that continues to this day into the primary factors that move stocks. These principles aren t based on someone s opinion or theories from business schools. They re all based on what actually works in the market. brokerage online stock trading

Search the FAQs for How to Sell Stocks

• Selling Stocks To Cut Losses

  Almost every investor can expect to experience losses. But successful investors know how to keep them to a minimum. broker justin ticket

• When To Sell Stocks To Take Profits

  Buying the right stocks is only your first step. Learning to recognize the most opportune time to take your profits is just as important. Charts are part of this education. real estate brokerage

• Reading Key Selling Indicators

This list will help you learn to recognize the signs that it s time to sell a stock. commodity broker

• How to Sell -- A Checklist

  A summary of the most important rules in deciding when to sell stocks. brokerage house

Trading Center Lessons on Buying Stocks Lessons on Selling Stocks What is CAN SLIM IBD CAN SLIM Licensing CAN SLIM

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