Options trading is a sector of the stock market that is fairly easy for most newbies to investing. If you've never heard of options trading or you just want to learn more about how to make money with this method, we're going to go over all of this below.

What Is Options Trading?

Options trading is purchasing the ability to buy or sell a specified number of stock for a set price in the future. With options trading, you're not actually purchasing ownership or stock in a company. Rather, you're purchasing the opportunity to buy or sell ownership or stock of a company in the future. Let's look at some common terms involved in an options agreement so you can better understand what it's all about.

Expiration Date

Options contracts come with a few key terms that you'll need to understand. First, each options contract has an expiration date. You can exercise your options contract up through the expiration date. After the option has expired, you no longer have the ability to exercise the agreement.

Stock

Each option contract is for a particular stock. When looking at options online, you'll see the ticker symbol of the company that the options contract is regarding. When you purchase your options contract, you don't get ownership of the stock. Rather, only when you exercise your option do you get to actually buy ownership via the stock.

Strike Price

The strike price is a very important number to understand as it determines how and when you exercise your options agreement. The strike price is the price at which you can buy or sell stocks that were included in your options agreement. For example, if the strike price is four dollars for a call option, then you could exercise your contract by purchasing the identified stock at the strike price.

Call or Put

Every options contract will be either a call or a put. In the stock market, a call is when you buy a stock. A put is when you sell a stock. Therefore, you can purchase an options contract that gives you the ability to buy or sell a stock at the agreed-upon strike price before the expiration date.

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How Can You Make Money With Options Trading?

If you're thinking about making money trading options, there are various ways you can do so. By understanding the basics of call and put options, you can start to formulate your own method for making money. Let's go over a few examples of basic options to get you started.

A Call Option

A call option is ideal to purchase when you know that a company's stock price is likely to rise in the near future. For example purposes, let's say that you buy a call option for 100 shares of stock ABC that has a strike price of $50 and an expiration 30 days from now. Fast forward 20 days and you notice that the stock price of ABC has increased to $60 per share.

You'll want to exercise your call option. This means that you can purchase 100 shares of ABC for $50 per share. Then, you can turn right around and sell those stocks at the current market rate of $60 per share. That's a $10 per share profit from your call option.

A Put Option

The other common type of options contract is a put option. This option agreement gives you the ability to sell stocks in the future at a set price. You'll want to use this type of option when you know that a company's stock is likely to decrease in the near future.

For this example, let's say you're looking at an options contract for company XYZ. The options contract is for 30 days, 100 shares of stock, and sports a strike price of $30 per share. The day before your options agreement expires, the stock price of XYZ drops down to an all-time low of $10 per share. You can exercise your options contract.

You'll start by purchasing 100 shares of stock XYZ on the market for $10 a share. Then, you'll go ahead and sell those shares according to your options contract sale price of $30 per share. You'll be able to profit $20 per share with this method.

As you can see, there are various ways to make money with options trading. Understanding the basics above can give you a great foundation to which you can build upon to create your own unique methods for options trading.

When considering where to take your company to, try to think differently to all of the other companies out there. Don’t jump for the easy route of heading straight to the US or an easy nearby market, for example from the UK to Ireland.

Home in on your options

Before you make a move, decide on your options. Does it make financial and logical sense to expand by city, country or by language?  If you’re looking to expand straight into another country over a city first, then take a private jet charter and talk to the locals. It’s imperative when expanding your business globally, to spend some time on the ground where you are wanting to set up base and speak to people who live and work there. You could look at all the data trends for your business sector in that country and analyse whether or not the market will suit your model, but nothing beats the invaluable insight of the people who reside there full time.

Prioritise the markets

There isn’t much point trying to jump into every single market that’s detailed in your statistics document. Think about what really matters to your business and what direction you’re heading in.

Is this new market as big as your home market or bigger? If the answer is no, then it’s meaningless expanding your business into this country, unless you have a strong reason. Are there similarities across markets? If you are a logistics or eCommerce business, the likelihood is that you’ll need established distribution hubs that cover most of Europe and beyond – make sure you check out factors like this before you make the move.

Can you get ahead of the local competition? When you head to your desired location and speak to the locals, get an idea of how established your competitors are. Are they start ups who you will have certain advantages over, or are they big conglomerates who may be hard to beat?

Leverage Partner and Channel Relationships

Working with your partners is a solid strategy when looking to expand globally. Maybe the distribution company you work with has its headquarters in your desired country or has a strong presence there. Keep your partners in the loop with your growth plans, you never know when you’ll need to lean on them for a greater insight and potential assistance as you drive your expansion forwards.

Saving and investing money are two completely different things. They each have a different purpose and play different roles in your life. You should make sure that you are clear on the concept before deciding which step to take on your financial journey to avoid stress and help towards meeting your financial goals.

It may seem like a simple question, but wondering whether you should save or invest will completely depend on your financial situation and what you want in life. So perhaps the best way to start is to work out the difference between saving and investing for, defining both concepts.

Saving

Saving involves you putting money into an account and adding to it regularly. Your capital will not be at risk and you have the chance to grow your money by earning interest on it. But there is a risk that the rate of interest paid on your money may not be higher than the rate of inflation and your money may not increase in value.

Savings are great to have as they are always available to access and can be used for many things such as emergencies or a down payment on a house. You can also set up savings accounts for major life events such as retirement and death. With the rising costs of funerals, for example, saving money for it now will help loved ones find a funeral director and pay for it without any stress or worry.

Pros: A savings account is easily accessible when you need money you can go to your bank and withdraw what you want. When you set aside money into a savings account, you’re not putting your funds at risk - a savings account is stable.

Cons: With low risk, comes low returns. Interest rates on savings accounts are lower than any other account. If you are planning on leaving the money in there for a long period of times, you may want to consider a different type of account with a higher interest rate.

Investing

Investing involves you allocating money for a long period of time into an investment, in the hope of making more money on it. When it comes to investing, there is no guarantee you’ll get your initial capital back, or make a profit. But you could end up growing your money, depending on how your investment performs.

Pros: When buying stock or another investment, you do so hoping that your investment will appreciate over time and earn you some money back. Stocks typically have the highest average return. However, they come higher risks. When looking to invest your money you have lots of choices too, from a classic car to a house.

Cons: Investing involves you allocating money for a long period of time into something that should gain in value, in the hope of making money on it. When it comes to investing there is no guarantee you’ll get your initial capital back, or make a profit. But you could end up growing your money, depending on how your investment performs.

Taking money from an investment is not as easy as withdrawing it from a savings account. While it’s best to invest for the long term, if you need the money and want to sell what you’ve invested in you need to wait for the funds to become available.

So whether you put the bulk of your money into a savings account or into an investment, it will depend on various factors and what suits your situation best. Both of them are important for overall financial security.