There are two types of listed options that you can buy in Amsterdam – Dutch style and American style.
They are set appart by how traders execute them. With a Dutch-style option, the holder has the right to buy or sell the underlying asset on or before the expiration date. With an American style option, the holder can exercise at any time up to and including the expiration date.
So, what sorts of options can you buy?
If you want to speculate on the price of a particular stock, then you can buy a call or put an option on that stock. A call option gives you the right to buy shares at a set price (the strike price), while a put option allows you to sell shares at the strike price.
If you think a stock will go up, you will buy a call option. If you think it will fall, you will buy a put option. The amount you pay for the option (the premium) will depend on how likely the market thinks the stock is to move.
Some options give you the right to buy or sell a basket of stocks or an index such as the AEX index. These are known as index options. Again, you can either buy calls or puts.
If you want to bet on the overall market’s direction, buying an index call or put could be excellent. If you anticipate that the market will go up, you will buy a call option. If you think it is going down, you will buy a put option.
Index options can also hedge against a fall in the market. So, if you own a portfolio of shares and are worried about a market crash, you could buy an index put option to protect your holdings.
You can also use options to generate income. One way to do this is to sell options that you think will not be exercised. It is known as writing options.
For example, let’s say you think XYZ stock will not move much over the next few months. You could sell a three-month call option with a strike price of $50 for a premium of $2 per share. If the stock price is still below $50 at expiration, then the option will expire worthlessly, and you will keep the $2 per share.
Options can be used in several different ways, and there are many different types you can buy in Amsterdam. So, it is worth doing some research (this site) to find out which ones best suit your investment goals and risks tolerance.
American style option
Different options give you the right to buy or sell shares at a set price, known as the strike price. With an American style option, the holder can exercise at any time up to and including the expiration date.
You can only exercise Dutch-style options on or before the expiration date. Index options give you the right to buy or sell a basket of stocks or an index such as the AEX index. These are known as index options. You can also utilize options to generate income. One way to do this is to sell options that you think will not be exercised.
These are known as writing options. Options are a versatile investment tool that you can utilize in several different ways to suit your investment goals and risks tolerance. It is definitaly worth your time and energy to do proper research to find out which types of options best suit your needs.
If you are a new options trader it is very important to follow the advice of a financial advisor or a profesional trader. They will advise you on possible pitfalls and how to avoid them. You can also join various online forums and follow the threads for insight into specific markets or news events.