Trading Options " Road To Millions Or Short Cut To Bankruptcy?
Trading options has several advantages over trading in ordinary shares (stocks). This method of trading can also be high risk if you do not know what you are doing. We will briefly look at the different scenarios.
The popular advantage of options is that you can make a lot bigger profits than if you should invest a similar amount of money in normal shares. The reason for this is what is called leverage in trading circles. Let us say you've got only $100 to invest and the price of your favorite stock is $100. So you can only buy a single share. Not a big deal.
Let's now say a call option on that stock sells for $.20. If this is true, then you can control 100 shares of that stock for only $20. Just imagine the leverage you have. This is what attracts many investors to option trading.
Buying just calls and puts can be a very risky business. We find that it is much safer to trade option spreads. To learn more about option trading, there are many free videos on Youtube. Some of the best will be by sjoptions. They focus on safety and low risk trades.
Options traditionally used to be utilized to hedge another investment you already have. Let's say you have shares in a company whose share price jumped up by 25% the past month. By investing in put options (which will cost you a fraction of the cost of 100 shares) you can protect your investment. The way it works is that, should the share price drop, the value of the put options will rise with the same amount. Your net investment will therefore remain the same. This is a rather old strategy. In today's world, there are many better ways to hedge a portfolio. We prefer using spreads to just buying calls and puts. - 23200
The popular advantage of options is that you can make a lot bigger profits than if you should invest a similar amount of money in normal shares. The reason for this is what is called leverage in trading circles. Let us say you've got only $100 to invest and the price of your favorite stock is $100. So you can only buy a single share. Not a big deal.
Let's now say a call option on that stock sells for $.20. If this is true, then you can control 100 shares of that stock for only $20. Just imagine the leverage you have. This is what attracts many investors to option trading.
Buying just calls and puts can be a very risky business. We find that it is much safer to trade option spreads. To learn more about option trading, there are many free videos on Youtube. Some of the best will be by sjoptions. They focus on safety and low risk trades.
Options traditionally used to be utilized to hedge another investment you already have. Let's say you have shares in a company whose share price jumped up by 25% the past month. By investing in put options (which will cost you a fraction of the cost of 100 shares) you can protect your investment. The way it works is that, should the share price drop, the value of the put options will rise with the same amount. Your net investment will therefore remain the same. This is a rather old strategy. In today's world, there are many better ways to hedge a portfolio. We prefer using spreads to just buying calls and puts. - 23200
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Find out more about option trading and how can work for you. With the right option trading system in place you will make money. Set up your future today with a fantastic way to earn cash!
posted by X - Men @ 3:55 AM
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