Options Trading Tutorial

How does trading stock options work?

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

Public Comments

1. <<<can I simply trade the contract cost without ever having an obligation to the shares?>>> Yes. The only time you have an obligation is when you have written an option (sold an option you do not own). <<< 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?>>> Yes <<<Does it also work that way with put options?>>> Yes ------------ One important thing you need to understand is that the price of an option depends upon more than the price of the stock. It is perfectly possible to buy a call option but see the price of the call option go down even though the price of the stock went up. Similarly, it is perfectly possible to buy a put option but see the price of the put option go down even though the price of the stock went down.
2. 1. yes, options is about right, not obligation. 2. yes, you can. 3. yes, it's the same as put options.