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Option Order Entry for Beginners through Experts
Our Option Order Entry screens are capable of handling simple, outright option purchases to more complex spread orders. We can accommodate straddles, strangles, naked call or put sales, everything that you would like to do as an experienced investor. Importantly, no matter how you choose to enter an order on the Friedberg Direct trading platform, we always give you a chance to double-check your order for accuracy and view a real-time quote before actually sending the order for execution.
An option is the right, but not the obligation, to buy or sell an underlying futures contract at a specified price. For example, you could purchase an option to buy a November Swiss franc futures contract at 88¢ per Swiss franc (an option to buy is a "call" option).
What do you do once you buy the Swiss franc option? You watch price movement. Suppose the November Swiss franc futures price rises above 88¢. You could exercise the option and assume a long November Swiss franc futures contract. You would have bought futures contract at 88¢ that you could sell immediately at the higher price (buy low, sell high). But you don't have to. With prices above 88¢, your option would have increased in value, so you could choose to offset it by selling back the same option at a profit. If the futures price falls below 88¢, the option would have decreased in value. Then you can simply forget about it and let it expire, losing the money you paid for it.
Puts and calls: There are special names for options, depending on whether the option is for the right to buy or sell a futures contract. A put option is the right, but not the obligation, to sell a futures contract at a particular price. A call option is the right, but not the obligation, to buy a futures contract at a particular price. These terms originated from the concept of putting a commodity on the market (selling) and calling a commodity from the market (buying).
Options trading
In options trading, the buyer has a right, the seller has an obligation. An option buyer purchases the right, but not the obligation, to buy or sell the underlying futures contract at a specified price. For every option bought, someone has to sell that option.
What options are traded?
Today at most futures exchanges, options are available on a great variety of futures contracts. These include the following commodity groups: Agricultural commodities, foreign currencies, interest rate products, equity indices, energy products and metals. More options are traded on interest rate futures than any other category.
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