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I've been trying to understand the world of stocks lately but I'm having an hard time grasping the meaning of call options. What's the point? Why options were e

• mackatap 5y ago
  It is basically a contract to either buy or sell a stock at a certain price on a certain date. You can sell that contract. The point is that the projected price of a stock can shift much more rapidly than its actual value. So as a day trader, you can make a higher margin in shorter time.
  • Ferrotin 5y ago
    This is not correct. The stock’s future price is represented by its current price. Options are contracts that give you the _option_ to buy or sell a stock at a certain price on (or before, if American-style) a certain date. Options are priced low relative to the actual stock price, but they move proportionately to the price, hence they have higher leverage.
    • samwestdev 5y ago
      Still, I don't understand what's the point. Who and why were option invented. Just for speculation? Also who sells this contracts? The brokers?
      • Ferrotin 5y ago
        As for the origins, I don’t know; you can research it, but the appeal of buying an option is that downside is capped at the price of the option, with unlimited upside, at it lets you make leveraged bets on price movements either to make more money, or as a form of insurance. For example, Mark Cuban famously used options to lock in his Yahoo stock value. Market makers often sell the contracts (or buy them). An example of one is Citadel. Brokers route your orders to exchanges where this happens. Sometimes you might get your order matched with a retail counterparty, especially if you deliberately avoid crossing the spread.