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The basics of options: when playing the market, options can be as simple or complex as you desire to make them.
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Fuel Oil News
- Article date:
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July 1, 2005
- Author:
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Copyright informationCOPYRIGHT 2005 Adams Business Media. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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This month we will discuss the basics of options. You cannot effectively use options tools in your hedging portfolio until you understand how they work. This discussion will focus on how options work, while future articles will delve into how to utilize them as a hedging tool for your business.
An option is a choice. When you purchase an option on a futures contract, you have purchased the ability to choose to turn this option into a futures contract if it is financially feasible. If it does not make economic sense to turn it into a futures contract, you do not have to; you have the "option." The purchase of a "put option" is the right to turn the option into a short ...
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