One option is a contract between a buyer and a seller of a security deposit. Sun's stock option program is an agreement for a share. There are two basic types of American and European options. Most exchange-traded options is an American option, a contract can be exercised any time between the date of purchase and expiration date. The other option is a European option. There is an option contract that can be exercised only at expiration date.

There aretwo terms you need to know as an option. The price at which a reserve fund can be bought or sold is the base price. The expiry date is when the option expires, if you run the option or let him make worthless.

There are two reasons why people should use the option. The first is speculation. Here people try to guess "the direction of stock movement, the extent and timing of this movement. You win if your guess moneyRight and lose money when you are wrong.

The second reason is the insurance or for stock. If you buy shares, and are afraid that the stock to go down, then you can be assured with the help of the option. If the shares fall, you will have the option. Thus, selecting Options, you can limit the loss.

There are two basic strategies, which calls and puts. A call option gives the buyer the right to buy the underlying asset while a put gives the buyer the right to sellthe underlying asset. If you believe that when a stock will be next year, asking to buy. But if you think the price will decline next year, asking to buy.

From this basic strategy, you can combine to create a complex strategy. For example, you can buy two different call options with expiration date and price, and put two different maturity date and price.