Why Options?

If you buy and sell stocks, then it is almost required that you have a working understanding of how options work. Many investors tend to shy away from options because they feel they are too risky or too difficult to understand. If you probe these same investors a bit further, you will find that quite a few do not even understand basic option principles or have not put in the time to do adequate due diligence on the subject matter.

Investors trade options because it helps them manage risk. With options, you can hedge out portfolio risk against markets that move against you. In essence, you can buy puts that act as insurance policies against downward moves in the market. With an unpredictable market, like the one we currently have, it’s always nice to have an added level of protection. In non-margin option accounts, options provide limited risk in that your max loss will be no more than what you paid for the option. So regardless of what happens to the market, you can hold your positions throughout knowing that what you have to lose is already embedded into the trade.

Investors trade options because they offer flexibility. Options can be used in any market environment or personal circumstance. They can be used for short-term, medium-term, or long-term strategies. With options, you can play both sides of the market. In fact, you can play both sides at the same time if you choose to. There are so many different option strategies that you can really tailor your portfolio to play to your trading strengths. If you want be speculative, you can be. If you want to generate a monthly cash flow, you can as well. With options, you create your own investment strategy. You play your way.

Investors trade options because the set up for trading is an easy streamlined process. One major deterrent to investing is the large amounts of capital required to get started. With options, you can own the right to control a large amount of stocks without having to pay full price for those stocks. It’s called leverage, and with options you have it. Having leverage enables you to benefit from changes in the underlying price without having to own the underlying outright. Another major deterrent to investing in options was finding an options broker.

Today, options can be traded over the computer and there is a plethora of online brokers that offer very cheap commission structures. The process is fast and the middleman has been eliminated to decrease commission costs. As for option information, a simple Google search will return libraries of options information. For structured education, look into an options course. For an apprenticeship learning experience, then look into an options mentoring program. The choice is yours as to how you want to learn about options. Years ago, options were only known and taken advantage of by affluent individuals. Luckily, times have changed and now they are accessible to everyone that has an internet-enabled computer. Happy options trading!

Want to find out more about Options Trading, then visit us and choose the best Options Course for your needs.

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