January 9, 2009
How does trading stock options work?
cornacopia16 asked:
For instance, can I simply trade the contract cost without ever having an obligation to the shares? For instance, let’s say I buy a call contract at $2.50 ($250.00) and the next day the stock rises and the same call contract is worth $2.55 ($255.00). Would I be able to sale the same call contact for the $2.55 with no other obligations even before the expiration? Does it also work that way with put options?
Thank you
For instance, can I simply trade the contract cost without ever having an obligation to the shares? For instance, let’s say I buy a call contract at $2.50 ($250.00) and the next day the stock rises and the same call contract is worth $2.55 ($255.00). Would I be able to sale the same call contact for the $2.55 with no other obligations even before the expiration? Does it also work that way with put options?
Thank you
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Comments on How does trading stock options work? »
Yes. The only time you have an obligation is when you have written an option (sold an option you do not own).
1. yes, options is about right, not obligation.
2. yes, you can.
3. yes, it’s the same as put options.