How to Trade Stock Options in European Markets

Stock options allow investors to profit from rising and falling share prices while limiting their potential losses.

Stock options are financial instruments that allow the buyer to sell or buy a certain amount of a particular stock at a predetermined price (strike price) within a certain time horizon. A stock option obliges the issuer to buy or sell the stocks as stipulated in the stock option's contract if the buyer wished to execute it. Stock options can be bought and sold in the secondary markets.



In Europe, the absolute leader in stock options trading is the Euronext trading platform, which facilitates options trading on over 250 European companies via Amsterdam, Belgian, London and Paris exchanges.

Instructions

1. Open a trading account a broker that allows to trade Euronext's stock options. All major full-service brokers allow these financial instruments. For example, OptionsXpress, Interactive Brokers, Schwab, and Fidelity all allow to trade European stock options as of 2010.

2. Determine particulate options you'd like to buy. Buy call options (those that allow you to buy a stock at a certain price) if you expect the price of the underlying stock to go up. If you think the price of a company's stocks will go down, buy a put option, as its price increases while that of the underlying stock falls.

3. Instruct your broker to buy the options on Euronext. Typically, there are three ways you can do that. The cheapest and most convenient way is to make a trade online. A little more expensive is a phone order for an option via an automated phone call. The most costly way to trade options is via speaking to a human broker.

References

• Euronext: Stock Options
• Investopedia: Options Basics: Introduction

Resources

• Schwab: Options
• Fidelity: Trading Options
• OptionsXpress
• Interactive Brokers