Options can be a useful tool for trading and investing, especially in volatile markets, allowing for leverage, the ability to hedge, and potentially generate income.
Though options trading involves risks and is not appropriate for all investors.
Options are a tool that can help manage risk exposure of portfolios or individual positions in response to market swings. In addition to risk hedging, options are now widely used by investors for speculation and by those seeking income.
Options can provide leverage which means the buyer can pay a relatively small premium for market exposure when compared to what it would cost to purchase the stock. An investor may see large percentage gains from comparatively small, favorable percentage moves in the underlying product.
However, if the underlying stock price does not rise or fall as anticipated during the lifetime of the option, leverage could magnify the investment's percentage loss.
These are basics about options. For many traders, options are no different from other assets that can be traded on the market.
The concept of “buy low and sell high” still applies to option trading. But just like stock trading, the order can vary. A trader can also sell high them buy low.
It may sound a bit confusing at first. That’s why we are bringing this course to you.
In upcoming courses, we'll walk you through the basics about options, show you the important factors for options pricing, and dive into some commonly used strategies.
Let’s get started.
