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Introduction to
Options Trading Guide
TM[expert eez]Table of Contents
Options Basics.........................................................................................................................................4Options Pricing.........................................................................................................................................6Reading Options Quotes.........................................................................................................................8Basic Options Trading Strategies........................................................................................................... 9Quiz Yourself on Options....................................................................................................................... 11More Information and Additional Resources....................................................................................... 15
Futures trading involves risk of loss. Trading advice is based on information taken from trades and statistical services and other sources which RJ O'Brien believes are reliable. We do not guarantee that such information is accurate or complete and it should be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future trading results. Introduction
Thank you for your interest in RJO Futures' Introduction to Options Guide.
Options offer several different ways for an investor to explore and take advantage of opportunties in price movements in commodities, foreign currencies, stocks, and interest rates through versatitly, leverage, limited risk, and hedging.
Although the buyer of an option does have the advantage of a predetermined maximum risk (or "premium"), he or she is still risking 100% of an investment. Options are not suitable for all investors, and you should work with an RJO Futures Sr. Trading Advisor to determine if they are right for you. And as with any other speculative investment, the options investor should be aware of the risks and rewards before investing.
This guide is only an introduction to options trading. It is not intended to be an all-inclusive manual to the many different strategies available in options trading. A more in-depth explanation of strategies can be found in our upcoming Options Strategy Guide. Please keep an eye on www.rjofutures.com for more information on when the guide will be available.
Regards,RJO Futures Sr. Trading AdvisorsPhone: 800-441-1616 or 312-373-5478Email: info@rjofutures.comOptions Basics
History of Options Puts. These give the buyer the right, but not the obligation, to sell ("go short") the underlying futures The standard definition of options is that they are market at a stated price ("the strike price"), prior to contractual agreements that provide the right, but option expiration. not the obligation, for the buying or selling of an underlying asset at a certain date at a set price. The Generally speaking, if you think the asset price is premium is the price paid for that right. going down, you would buy a put. And if you think the price is going up, you would buy a call.Initially, they were traded in an over-the-counter market, with each contract having unique terms. It And there are basically three ways that options can was up to buyers and sellers to find each other, and be liquidated to make a profit or avoid loss:they did so via newspaper ads. Exercising. By choosing to take delivery of (call) or In the late 1960s, Joseph W. Sullivan, vice president sell (put) the underlying asset at the option's strike of planning for the Chicago Board of Trade (CBOT) price, a trader is "exercising" an option.proposed standardizing strike price, expiration, size, and other contract terms. Offsetting. This reverses the original transaction to exit the trade. In other words, a buyer of an option The CBOT established the Chicago Board Options would sell it to liquidate, while the writer of an option Exchange and started trading listed call options would buy it back to liquidate.on 16 stocks on April 26, 1973. Put trading was introduced in 1977. Expiration. If an option is not offset or exercised, it eventually expi... [download for more]
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