LONG AND SHORT

The most important factor in any type of investing is understanding. All investors should have a complete understanding of any trade before it is executed. Basic knowledge of terminology is a necessity. In this section The Option Profit Team will define a few of the basic terms involved with option and equity trading. In our Advanced Membership you will find advanced terminology and more detailed examples.

Open - enter into an option position
Close - exit out of an option position
Long - means you bought or own the underlying stock or option position
Short - means you wrote or sold the underlying stock or equity position
Underlying - the security an option contract has been sold/bought against
Contract - an option term, typically 1 contract = 100 shares of the underlying equity
Premium - the price a buyer pays and a seller receives when an option contract is bought/sold
Strike Price - the price at which an option contract can be exercised
Exercised - when the person who is long the option utilizes his/her right to buy or sell the underlying at the strike price
Expiration Date - the last day an option contract can be exercised before losing all value
Assigned - when an option contract is exercised and the underlying stock is put to the seller at the strike price
Called away - when an option contract is exercised and the underlying is purchased from the seller at the strike price
On The Money -  an option contract where the strike price and the underlying equity price are the same
In The Money - a call contract with a strike below the underlying  / a put contract with a strike above the underlying
Out Of The Money - a call contract with a strike above the underlying / a put contract with a strike below the underlying  

Refer to Glossary for terms and definitions

Option Profit members can elect to have trade ideas sent to them via secure email notification and have unlimited access to the features of their respective memberships.  All Option Profit Trade Ideas:

• Are sent in a timely manner
• Include strike prices and symbols
• Have estimated returns assuming expiration of the trade

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RISK is inherent in any investment. No individual or entity should invest with funds they cannot afford to lose. Option trading is time sensitive and involves risk including, but not limited to, loss of gains and principal. A leveraged investor risks the loss of  more than principal. Options do not have to be held until expiration and can be exercised at any point.  Option trades can be closed prior to expiration with a gain or loss being realized. It is important that you understand all trades and the risk associated before executing a transaction. The Option Profit provides broad ideas, not individual recommendations, and is not responsible for any losses incurred. Diversification is important with any strategy and should be considered when investing  Before trading consult with a financial advisor to determine if option trading is appropriate for you and your financial goals.