Part 9 Tradig Master Class

Option Trading Explained

Option trading is a form of derivative trading where the value of a contract is based on an underlying asset, such as stocks, indices, commodities, or currencies. Options give traders the right, but not the obligation, to buy or sell an asset at a specific price before or on a certain date. This flexibility makes options powerful tools for both hedging risk and speculating on price movements.

How Option Trading Works

Option trading involves two parties — the buyer (holder) and the seller (writer). The buyer pays a premium for the right to execute the trade, while the seller receives the premium in exchange for the obligation to fulfill the contract if exercised.